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December 09, 2008 13:28 IST
The government on Tuesday allowed state-run oil company ONGC [Get Quote] Videsh Ltd to make a formal offer for acquiring 100 per cent equity in UK-listed Imperial Energy for 1.4 billion pounds despite returns falling on lines with crude prices.A meeting of the Cabinet Committee on Economic Affairs was specially convened this morning to consider OVL's Imperial bid, as Tuesday is the last date for making the offer to the target company's shareholders.Prime Minister Manmohan Singh chaired the meeting that had just one agenda and lasted one-and-half hours, but no official word was available.Petroleum minister Murli Deora, emerging from the meeting, declined to comment, saying: "We will let you know in due course."However, sources said the CCEA has approved OVL to go-ahead with the offer.
ONGC Videsh Ltd's 1,250 pence a share bid gave the company a 10 per cent internal rate of return taking crude at $121 a barrel, but with rupee depreciating by 20 per cent against the dollar and crude falling to around $40 a barrel the IRR has come down to 3-4 per cent.The UK's takeover panel has already rejected parent company ONGC's plea for more time to make a formal offer for acquisition of Imperial Energy Corp Plc.Imperial explores for oil in Russia's Siberia region and had the equivalent of 920 million barrels of proven and probable oil reserves as on December 2007, according to an audit by DeGolyer & MacNaughton. '2P' tag means a 50 per cent likelihood of recovery of the reserves.
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