A trio of state-controlled Indian oil companies have bid $5 billion for stakes in Canadian oil sands assets owned by ConocoPhillips , in what could be the next major test of Canada's appetite for foreign investment in its energy resources.
A completed deal by a group that includes producers Oil and Natural Gas Corp and Oil India Ltd, along with refiner and retailer Indian Oil Corp, would be the first in Canada for Indian energy companies after years of strong public expressions of interest in the Alberta oil sands.
"We have bid along with Oil India and Indian Oil Corp," a source at ONGC Videsh, the overseas investment arm of ONGC, told reporters on Monday. A source at Oil India said the bid was submitted at the end of July.
India is the world's fourth-largest oil importer, buying nearly 80 percent of its needs from abroad. With demand and refining capacity rising, the government has told state firms to secure energy assets overseas to help power the expanding economy.
In January, ConocoPhillips put stakes in six Alberta properties on the auction block. They produce 12,000 barrels of oil a day from an estimated 30 billion barrels of bitumen.
The one producing project in the package is Surmont, run in a joint venture with France's Total SA. Located south of the oil sands hub of Fort McMurray, Alberta, the steam-driven development pumps about 25,000 barrels per day. The partners are working to boost that to 136,000 bpd, starting in 2015.
ConocoPhillips declined to comment on the bid from the Indian firms, the timing for announcing the results of the auction, or the overall level of interest.
"We do not comment on market rumors," spokeswoman Davy Kong said.
India's bid comes as Canada undergoes an extensive study of its capacity for investment by foreign state-owned enterprises in the tar sands, the world's third-largest crude source, following a $15.1 billion bid for Calgary-based Nexen Inc by CNOOC Ltd, the Chinese state-owned oil company.
The Conservative government of Prime Minister Stephen Harper has promised to release a framework for future deals when it announces its decision on the Nexen takeover later this year.
The Comptroller and Auditor General (CAG) of India last month flayed ONGC, the country's top oil company, for its tardy pace of exploration and lax efforts in development. Its output has been almost stagnant for years.
ONGC Videsh announced a shift in policy last year, when its then-managing director, Jomen Thomas, said his firm would seek to buy assets in politically less risky regions such as North America to cut its risk and boost output.
It aims to invest $20 billion to help increase its output seven-fold by 2030.
In 2011/12, ONGC Videsh produced 7.4 percent less oil and gas output than a year earlier, at about 175,000 bpd.
Managing director D. K. Sarraf said on Monday that oil and oil-equivalent gas output from the company's assets may also decline in the current fiscal year due to geopolitical problems in Sudan and Syria. He said he hoped output would improve in 2013/14 when new fields including those in Myanmar's A1 and A3 blocks are commissioned.
Sarraf declined to comment on a bid for ConocoPhillips but said: "The market (for mergers and acquisitions) is reasonably good. There is a lot of action in North America, Canada as huge credible resources are there."
The other properties in the ConocoPhillips package are assets known as Thornbury, Clyden, Saleski, Crow Lake, McMillan Lake. The land totals 715,000 acres.
ONGC Videsh recently bought the 2.7 percent stake of Hess in the large Azeri, Chirag and Guneshli group of oil fields in Azerbaijan, and ONGC Chairman Sudhir Vasudeva said his firm could supply that equity oil to its refining unit MRPL, which recently raised capacity to 300,000 bpd.
MRPL buys Azeri light crude through spot tender and short-term deals. The move will help MRPL in replacing some of the oil it used to buy from Iran, as western sanctions aimed at curbing Tehran's nuclear program disrupt shipments.