OVL to buy Anadarko's 10% stake in Mozambique field for $2.6bn

ONGC Videsh Ltd (OVL) is likely to buy US energy major Anadarko Corp's 10% stake in a giant Mozambique gas field for $ 2.6 billion this week, the fourth acquisition by the state-owned firm in a year.

OVL, which under DK Sarraf has transformed from a timid firm into an aggressor that stitched over $ 11 billion worth of deals since September last year, is likely to announce in a day or two the deal to buy Anadarko's 10% stake in Mozambique's offshore Rovuma Area 1, sources said.

The company had on June 25 announced buying Videocon's 10% stake in the same field, which may hold as much as 65 Trillion cubic feet (Tcf) of gas resources, along with Oil India Ltd (OIL) for $ 2.475 billion.

Sources said unlike the June deal, OVL, the overseas arm of Oil and Natural Gas Corp (ONGC), will buy Anadarko's stake alone in what will be India's second biggest overseas energy acquisition ever.

OVL, which had gone into a shell after the January 2009 acquisition of Russia-focused Imperial Energy plc for $ 2.1 billion, has turned a new leaf after Sarraf took over as Managing Director in September 2011.

The Imperial deal had faced lot of criticism, including from CAG, as oil production lagged the projections made by the company's former owners. It took Sarraf almost a year to lift sagging morale of employees who were unwilling to take decisions for the fear of facing flak later.

Sources said the company is now transformed into an aggressor and is even looking to scuttle a large Chinese deal in Brazil.

The company, which since inception had invested $ 17 billion in 32 assets in 15 countries till 2011, has struck over $ 11 billion worth deals in the past one year.

With under 8 million tonnes of oil and oil equivalent output from its overseas assets, OVL currently makes up for 15% of ONGC Group production of 60 million tonnes.

As per ONGC's vision document, OVL's share is to rise to 60 million tonnes by 2030 when ONGC Group's output would be 130 million (domestic production rising from 52 million tonnes currently to 70 million tonnes). 

 

OVL in September last year completed acquisition of Hess Corp's 2.7% stake in Azerbaijan’s largest oil field and an associated pipeline for $ 1 billion.

Last November, it announced a $ 5 billion purchase of ConocoPhillips's 8.4% stake in Kazakhstan's Kashagan project, touted as the biggest oil find since the 1960s when it was discovered in 2000.

The bid was, however, blocked by the Kazaksthan government that wants the stake to go to Chinese.

Sources said OVL has also acquired two blocks each in Columbia and Bangladesh and is mulling exercising its pre-emption rights to block China's Sinochem Group from buying 35% interest in Brazilian oilfields for $ 1.54 billion.

OVL holds 15% stake in the block BC-10, known as Parque das Conchas, where Brazilian state-controlled oil firm Petroleo Brasileiro SA or Petrobras is selling its 35% stake to Sinopec.

In June, OVL-OIL had bought Videocon's 10% stake in Rovuma block in 60:40 ratio.

The Rovuma field may hold as much as 65 Tcf of inplace gas reserves, 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 dollars and their share will come to $ 1.5 billion.

OVL will have to shell out an additional $ 1.5 billion as its share of the cost after the Anardako acquisition.

The transaction is to close in the last quarter of 2013.

OVL-OIL need approval of the Mozambique and Indian government, regulatory permissions and existing partners in Rovuma-1 area waiving off their pre-emption rights for the deal to go through.