BackONGC Videsh to pay $2.6 bn to Anadarko for Mozambique block stake
After the acquisition, India will own 30% in the block said to be the largest gas discovery off Africa’s east coast
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New Delhi: State-owned ONGC Videsh Ltd (OVL) has agreed to buy US-based Anadarko Petroleum Corp.’s 10% stake in Mozambique’s Rovuma 1 offshore block for $2.64 billion (around ₹ 16,000 crore) as it seeks overseas assets to reinforce India’s energy security.
ONGC Videsh, the overseas arm of Oil and Natural Gas Corp. Ltd (ONGC), signed definitive agreements on 24 August with Anadarko Moçambique Area 1 Limitada (Anadarko) to this effect, the parent company said in a statement on Monday. The acquisition is subject to regulatory approvals.
After the acquisition, Indian entities will hold a 30% stake in the deep water block, said to be the largest gas discovery off Africa’s east coast, with estimated recoverable reserves of 35 to 65 trillion cu. ft (tcf).
“We are very pleased to have agreed with Anadarko the terms to acquire a direct 10% Interest in Area 1 to add to the 10% interest OVL has agreed to jointly acquire with OIL (Oil India Ltd) recently," said ONGC Videsh chairman Sudhir Vasudeva in the statement. “As a result of both transactions, OVL will own a significant interest in this strategic project in Mozambique. Area 1 has potential to become one of the world’s largest LNG (liquefied natural gas) projects and today’s acquisition marks a further significant step by OVL/ONGC group towards the energy security of our country," ONGC Videsh chairman Sudhir Vasudeva said in the statement.
State-run Bharat Petroleum Corp. Ltd also has a 10% stake in the offshore field. Oil India and ONGC Videsh had earlier announced the purchase of Videocon Mauritius Energy Ltd’s 10% stake for $2.47 billion. The transaction is expected to be completed by the end of December. The petroleum ministry has sought the cabinet’s permission for the stake purchase. “As the operator of Area 1, we are very pleased to have reached this agreement with OVL, which values our pre-transaction interest at more than $9.6 billion," Anadarko said in a statement.
Countries such as India that are dependent on imports to meet their oil needs are seeking to acquire energy assets overseas to shield themselves against possible supply shocks.
India’s efforts at energy security have yielded mixed results against the backdrop of faltering domestic production. OVL’s $2.1 billion acquisition of a stake in Imperial Energy Corp.’s Siberian deposits has not produced the kind of results anticipated when the acquisition was made.
India’s domestic gas production has been consistently falling due to declining production from Reliance Industries Ltd’s KG-D6 block. Domestic production was 52.22 billion cubic metre (bcm), 47.56 bcm and 40.67 bcm in 2010-11, 2011-12 and 2012-13 respectively. “The Area 1 LNG project is strategically located to supply LNG to India at a competitive price. Participation of Indian PSUs (public-sector units) in the project will facilitate access of LNG to the growing Indian gas market," the ONGC statement said.
India’s demand for LNG is growing. The country imported 13.43 million tonnes of LNG in 2012-13. India currently has three operational LNG terminals at Dahej (10 mtpa), Hazira (3.6 mtpa) and Dabhol (1.2 mtpa). “The transaction with Anadarko will take OVL’s interest in the Rovuma Area 1 block to 20% (including the 10% indirect stake held together with OIL), and represents a significant step towards ensuring energy security for India.," said Raj Balakrishnan, co-head of investment banking, at Bank of America Merrill Lynch, which acted as exclusive financial adviser to OVL on the deal.
After the acquisition, the stake of Anadarko (36.5%), the field’s operator, will come down to 26.5%. The other partners are Empresa Nacional de Hidrocarbonetos of Mozambique (15%), Mitsui and Co. Ltd of Japan (20%) and PTT Exploration and Production Public Co. Ltd (8.5%) of Thailand. The Rovuma field covers 2.6 million acres.
“The block contains the Prosperidade and Golfinho/Atum natural gas complexes that combined hold an estimated 35 to 65-plus trillion cubic feet (Tcf) of recoverable natural gas resources. In cooperation with the Government of Mozambique, Anadarko, its partners, and Eni (as the operator of the adjacent Area 4 block) continue to advance the development of an LNG park with first LNG cargoes expected in 2018," the Anadarko statement said.
Shares of ONGC fell 3.16% to close at ₹ 267.80 on BSE on Monday. The exchange’s benchmark Sensex rose 0.21% to 18,558.13 points.
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