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Varun Ind to sell 51% in oil block to Chinese major

Press Trust of India / Mumbai 27 Dec 11 | 04:25 PM

Varun Industries, a diversified company with a presence in steel-ware, mining and oil and natural gas, today said it will sell 51% stake in an onshore oil block in Madagascar to Petro China subsidiary Da Qing Oil Field Company for $150 million.

"Da Qing Group has committed to arrange for oil exploration and necessary fund-raising process for the programme. They have committed to pay $150 million as upfront money toward consideration to Varun Group for ceding its 51% stake in the oil block," the Mumbai-based firm said in a statement.

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Varun has signed a joint venture cooperation agreement with the Chinese firm for the stake sale, the statement added.

The oil exploration block held by Varun Industries is spread over 6,884 sq km and holds prospective reserves of around 3,067 million barrels of oil.

"This is one of the major steps toward unlocking the value of our varied assets in Madagascar. This development gives us the confidence and strength to nurture and develop our other Madagascar assets," company Chairman Kiran Mehta said while talking about the stake sale to the Chinese firm.

"We will continue to hold a 49% stake in the JV. The money for oil exploration in the block will be invested by the Chinese partner," a company spokesperson later said.

He added that money from the stake sale will increase the liquidity of the company and will be utilised for other capex requirements.

The steel-to-mining company is currently working on extracting rare earth elements it found in Anosy region of Madagascar in July. Australia-based CPG Resources-Mineral Technologies had recently certified the rare earth reserves as containing about 46.5% ore grade total heavy mineral (THM) content on average.

Besides this, Varun has 1,111 uranium and several gold exploration blocks in Madagascar -- an island country located in the Indian Ocean off the southeastern coast of Africa.

The company has been on an expansion spree within India and is working to commission a flat steel plant in Rajasthan and a pig iron plant in Karnataka by 2015.

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