GAIL loses Tanzanian gas block to Singapore's Pavilion Energy

GAIL was keen to buy part of Ophir Energy plc's 40% stake in Blocks 1, 3 and 4, which are estimated to hold an estimated 15 trin cubic feet of gas reserves

GAIL India, the nation's biggest natural gas distributor, has lost out on a bid to acquire Ophir Energy's stake in gas blocks in Tanzania to Singapore's Pavilion Energy.

GAIL was keen to buy part of Ophir Energy plc's 40% stake in Blocks 1, 3 and 4, which are estimated to hold an estimated 15 trillion cubic feet of gas reserves.

It was, however, outbid by Pavilion which offered to pay $1.3 billion for a 20% stake in three gas blocks offshore Tanzania in East Africa.

GAIL had put a price of about $600 million for a 10% interest.

Pavilion Energy, established by Singapore's sovereign wealth fund Temasek earlier this year, in a statement last month announced the acquisition saying the transaction is scheduled to be completed in the first quarter of 2014.

The firm said it has "entered into an agreement to purchase 20% interest in Tanzania blocks 1, 3 and 4 from Ophir Energy plc for a consideration of $1.288 billion."

The acquisition will help the company diversify its supply of LNG to meet growing Asian demand just as Singapore vies to become a gas-trading hub.

The first deliveries from Tanzania blocks are scheduled to start in 2020.

BG Group is the operator of the three blocks with 60% stake.

With Ophir, GAIL was hoping to follow footsteps of ONGC Videsh Ltd into hyrocarbon-rich Africa. OVL has in two transactions acquired 20% stake in a giant gas block off Mozambique for over USD 5 billion.

East Africa has come into focus following massive gas discoveries in deep waters off the coast of Mozambique, which neighbours Tanzania.

The region is ideally placed to serve Asian export markets and so has attracted Indian firms that are trying to secure energy for the nation's growing energy needs.

GAIL is aggressively tying up liquefied natural gas (LNG) supplies from the US to Russia and Ophir would have given it the first foothold in Africa.

Ophir, which counts steel tycoon Lakshmi Mittal among its investors, has interests in five blocks in Tanzania. Mittal Investments Sarla holds 4.51% stake in the company.

Besides 40% interest in blocks 1, 3 & 4, Ophir has 80% operating interest in block 7 and a 70% operating interest in East Pande.