OVL-OIL offers $5 bn for 20% in Africa gas field

Closes in on the stake put on the block by Videocon, US' Anadarko

After buying ConocoPhillips’ 8.4 per cent stake in a Kazakhstan oil field for $5 billion last year, ONGC Videsh Ltd (OVL) and its partner Oil India Ltd (OIL) have closed in on another energy asset in Africa. The consortium has offered up to $5 billion to buy the combined 20 per cent stake of Videocon and the US-based Anadarko Petroleum in a Mozambique gas field.

The bidding for the stake offered by Anadarko and Videocon (10 per cent each) closed on Sunday. An announcement was expected to be made in the first week of April, a source directly involved with the auction process told Business Standard.

When contacted, OVL and Videocon officials declined to comment till an official announcement was made to the stock exchanges next week.

A banking source said OVL and Oil India had made arrangements for funding of up to $5 billion for the Mozambique stake. “OVL was quite aggressive in bidding when compared with foreign oil majors, but we have to wait for the outcome of the auction results for the final offer price,” the source said.

If OVL and OIL buy the 20 per cent stake, with their 30 per cent stake, they would become the single largest stakeholder in the Mozambique company. State-owned refiner BPCL already owns 10 per cent in the company. Anadarko currently has 36.5 per cent stake, while Japan’s Mitsui & Co, with 20 per cent, is the second-biggest. Thai firm PTT has an 8.5 per cent share, while the Mozambique government-owned ENH holds another 15 per cent.

State-owned Oil & Natural Gas Corp (ONGC) and its partners — Mitsui and BPCL — have signed a pact to study the feasibility of setting up a $500-750-million liquefied natural gas (LNG) import terminal at Mangalore. In the future, Mitsui and Indian public-sector oil firms are expected to play a major role in the Indian LNG space. An equity investment in Mozambique could further their downstream India investments.

For OVL, the acquisition will be yet another feather in the cap. In 2001, it had acquired 20 per cent stake in Sakhalin-I project in Fareast Russia. In January 2009, OVL completed the acquisition of Imperial Energy Corporation Plc – a UK-based Company having its exploration and production assets in the Tomsk region of Western Siberia, Russia, with an investment of $2.1 billion. Imperial Energy has failed to give good returns on investments.

Last year, OVL agreed to pay $5 billion for ConocoPhillips’s 8.4 per cent stake in a Kazakhstan oilfield. The Kashagan field, located in the shallow waters of the Kazakh North Caspian Sea, is the world’s largest development project. The buy is likely to be completed by the first half of 2013. Output would start from mid-2013.

OVL, with its 8.4 per cent stake, will get 315,000 tonnes of oil in the first year. The share will go up to 4.2 mtpa in 2028, when all the three phases of the field have been fully developed. This will help OVL offset the drop in production from its assets in Syria and Sudan, which had brought its total output down by seven per cent in 2011-12.
OVL’S GLOBAL SOJOURN
$10 billion Cumulative overseas investments as of 2011

RECENT ACQUISITIONS

• 2001: Acquired 20% stake in Russia’s Sakhalin-I project
• Jan 2009: Completed the acquisition of UK-based Imperial Energy Corporation Plc
• 2012: Agreed to pay $5 bn to acquire ConocoPhillips’s 8.4% stake in a Kazakh oilfield

Assets from which OVL produces hydrocarbons

Russia: Sakhalin-I and Imperial
Syria: Al-Furat Project
Vietnam: Block 06.1
Colombia: Mansarover Energy
Sudan: Greater Nile Oil Project and Block 5A
Venezuela: San Cristobal Project
Brazil: BC-10