Union government has allowed OVL, foreign subsidiary of ONGC, to go for the acquisition of UK-listed Imperial Energy at the original prices of $2.5-billion. The deal was approved by the government in August when it allowed OVL to participate in the bidding process for the acquisition of Imperial Energy.

The company approached the government as crude prices have significantly declined in the international market besides considerable depreciation of Rupee in terms of US dollar. This scenario has substantially changed the arithmetic of the deal and company is unlikely to make a good amount of profit from the deal. Crude oil rate was $121/barrel when the government approved the bid in August and it stands at $43 now which forced the company to rethink about acquisition at the original price.

However, the Union Cabinet, in its recent meeting, gave its nod for the biggest ever acquisition in the oil sector. Now, company can make the required offer on London bourses before the Tuesday deadline. Government wants to secure energy prospectus of the country by acquiring Imperial's reserves in Russia even at marginal profit.

Many market experts believe that the deal is worthless at the original price. Religare Securities analyst, Sudip Anand said, "The current crude prices do not justify the deal. However, Imperial possesses 920 million barrel oil, equivalent of P2 reserves which signifies long-term gains for OVL. The prices for the long-term average would again go in the range of $60-70 per barrel."