Making the third acquisition in ten months, oil and gas major ONGC along with Oil India on Tuesday agreed to buy Videocon Industries' 10 percent stake in a the largest gas field in the East African nation Mozambique for $2.5 billion and have hinted at snapping up a similar stake from Anadarko of the US for a similar amount. Interestingly, it can be noted that on June 10, late evening ONGC had issued statement saying they bought this same resource from Videocon, but only to be recalled within an hour for being "premature".
ONGC Videsh has sewed up the country’s second biggest energy acquisition ever when it along with OIL agreed to pay $2.475 billion for Videocon's 10 percent stake in the Rovuma-1 field, which is believed to have a whopping 65 trillion cubic feet (tcf) gas in reserves. This if proven true is more than 10 times the reserves in Reliance Industries' Eastern offshore KG-D6 fields, and has the potential to become one of the world's largest liquefied natural gas (LNG) producing hubs by 2018.
Besides the acquisition price, OVL-OIL will have to pay their share of the field development cost and the LNG plant. Field development and the LNG unit will cost a total of $15 billion and their share will come to $1.5 billion. "OVL and OIL signed definitive agreements in Singapore on June 25 with Videocon Mauritius Energy to acquire 100 percent of shares in Videocon Mozambique Rovuma 1, the company holding a 10 percent participating interest in the Rovuma Area 1 Offshore Block in Mozambique (Area 1) for $2,475 million," the two firms said in a press statement.
The acquisition will be done through a joint venture that OVL and OIL have floated. OVL will hold 60 percent of the venture and OIL the remaining 40 percent of the acquisition. The transaction is to close in the last quarter of 2013. OVL-OIL need approval of the Mozambique and Indian governments, regulatory permissions and existing partners in Rovuma-1 area waiving off their pre-emption rights for the deal to go through. Since September last year, OVL has announced deals worth about $8.5 billion.
OVL had completed acquisition of Hess Corp's 2.7 percent stake in Azerbaijan's largest oil field and an associated pipeline for $1 billion. Last November, it had announced a $5-billion purchase of ConocoPhillips's 8.4 percent stake in Kazakhstan's Kashagan project, touted as the biggest oil find since the 1960s when it was discovered in 2000. OVL is awaiting Kazaksthan government's approval for the deal.
US' Anadarko Petroleum, the operator of the Rovuma-1 field, and Videocon had each launched an auction of their respective 10 percent stakes in the Mozambique field earlier this year. OVL-OIL bid for both Videocon and Anadarko's stakes. A deal was struck with Videocon and the duo are advanced stage of negotiations to buy Anadarko's 10 percent stake. That deal, sources say, too may be announced in the coming weeks. The transaction was first announced by ONGC on June 10 and withdrawn the same day for being "premature".
Mozambique may hold 250 tcf gas reserves and OVL-OIL deal follows China National Petroleum Corp buying a 20 percent stake in another block in the Rovuma area for $4.2 billion from Italy's Eni. "The Area 1 LNG project is strategically located to supply LNG to India at a competitive price. Participation of OVL and OIL in the project will facilitate access of LNG to the growing Indian gas market," OVL statement said. "OVL and OIL will need to devote significant funding and technical resources to the development of the project, which will also enhance the strong business and cultural links between Mozambique and India," it said.
Area 1 covers about 2.6 million acres in the deep-water Rovuma Basin offshore Mozambique and represents the largest gas discovery offshore East Africa with estimated recoverable reserves of 35-65 tcf. The gas found in Offshore Area 1 is to be turned into LNG and shipped to markets like India.
