Ophir in $1.3 billion deal with Temasek unit for Tanzania gas

  Britain's Ophir Energy agreed a $1.3 billion sale of a stake in Tanzanian gas fields, bringing in a unit of Singapore's Temasek Holdings to help fund a development project in the latest Asian investment in East Africa's gas sector.

 

Ophir, whose shares soared 16% after the announcement of the long-awaited deal, said last month a sale process was under way with Indian state-run gas company GAIL in the running as a potential buyer.

 

The Tanzanian fields that Ophir discovered with its partner BG Group are its prize assets, estimated to hold 15 trillion cubic feet of gas.

 

Ophir said on Thursday it would sell a 20% interest in Tanzanian Blocks 1, 3 and 4 to Pavilion Energy, owned by Singapore state investor Temasek, for an initial $1.25 billion plus a further contingent consideration of $38 million.

 

The development of the liquefied natural gas (LNG) facilities required to exploit the fields will cost an estimated $10 billion, prompting Ophir, a company worth about $2 billion, to bring in a deep-pocketed partner.

 

Shares in Ophir gained 16% to 381.2 pence, their highest since August, topping Britain's mid-cap index . The company's stock had slipped at the time of its half-year results in August on a lack of progress on a deal.

 

VSA analyst Dougie Youngson said the deal was "very positive" for the company, which had been talking about bringing in partners for over a year.

 

"Ophir is now very well funded for its future exploration programme and has now proven it can identify and complete a transaction," he said.

 

Ophir retains a 20% stake in the three blocks following the deal with Pavilion. It also has majority stakes in two other exploration areas in Tanzania and exploration assets elsewhere in Africa, in Kenya and Equatorial Guinea.

 

"The sale is consistent with our strategy of adding value in the exploration and appraisal phase of the exploration and production cycle, monetising that value at the appropriate time and recycling that capital into further value creating opportunities," Ophir chief executive Nick Cooper said in a statement.

 

GAS-HUNGRY ASIA

 

Analysts had expected a company from gas-hungry Asia, which will be the main customer for East Africa's gas, to emerge as a partner for the project following previous interest from Asian investors in other deals in the region.

 

This year, Italy's Eni sold a 20% stake in its Mozambique offshore gas project to China National Petroleum Corp for $4.21 billion.

 

India's Oil and Natural Gas Corp agreed in August to buy a 10% stake in a gas field in Mozambique from Anadarko for $2.64 billion.

 

Temasek Holdings set up Pavilion earlier this year to help secure energy supply for the city-state as Singapore aspires to become an LNG trading hub.

 

Ophir said it expected the deal, which is subject to governmental consent and approval by Ophir's shareholders, to complete in the first quarter of 2014.