OVL, OIL sign pacts to acquire interest in Mozambique's Rovuma Area 1 offshore block

ONGC Videsh Limited (OVL) and Oil India Limited (OIL) have signed definitive agreements in Singapore on Tuesday with Videocon Mauritius Energy Limited to acquire 100 percent share in Videocon Mozambique Rovuma 1 Limited, the company holding a 10 percent participating interest in the Rovuma Area 1 Offshore Block in Mozambique for USD 2,475 million.

The acquisition is expected to be implemented via a newly incorporated entity, in which OVL and OIL are expected to hold 60 per cent stake and 40 per cent stake respectively. The acquisition is subject to the approvals of the Governments of Mozambique and India, relevant regulatory approvals, pre-emption rights and other customary conditions. The transaction is expected to close in the fourth quarter of 2013.

Area 1 covers approximately 2.6 million acres in the deep-water Rovuma Basin offshore Mozambique and represents the largest gas discovery in offshore East Africa with estimated recoverable reserves of 35 to 65 trillion cubic feet. The partners in Area 1 include Anadarko, operator of the project, ENH, Mitsui, BPCL and PTTEP. Area 1 has the potential to become one of the world's largest LNG producing hubs with first LNG expected by 2018.

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 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.

The acquisition would mark OVL's entry into this emerging world-class offshore gas basin with significant future upside potential, and is consistent with OVL's strategic objective of adding high quality international assets to its existing E and P portfolio. The acquisition would increase OVL's reserve and resource base resulting in a step further towards India's energy security. The project would also be an important milestone in reaching OVL's long-term production targets of 20 MMTOE by FY'18 and 60 MMTOE by FY'30.

"Considering the growing importance of natural gas in the primary energy basket, this acquisition is a significant step by OVL/ONGC group towards the energy security of our country", said Sudhir Vasudeva, Chairman, OVL.

Bank of America Merrill Lynch is acting as the exclusive financial adviser, Simmons and Simmons as legal adviser, Ernst and Young as tax and accounting adviser and Robertson (UK) Ltd - a CGG company, as technical adviser to OVL.