OVL, OIL plan dollar bonds to bag Mozambique asset

Oil and Natural Gas Corporation's (ONGC's) foreign arm, ONGC Videsh Limited (OVL), and Oil India have started talking to bankers abroad to raise dollar bonds for their $5-billion acquisition of a 20 per cent stake in a gas field in Mozambique. The stake would be sold by Anadarko Petroleum and Videocon Industries, operators of the field.

OVL has hired Citibank, Deutsche Bank and Royal Bank of Scotland to raise about $1 billion from the foreign market.

Though French oil major Total was also interested in the stake, banking sources said the Indian companies were far ahead in the race.

When contacted, Videocon officials refused to comment on the deal, citing a confidentiality agreement. ONGC officials, who are abroad to sell bonds, could not be contacted.

For OVL, the Mozambique gas field stake is critical, as its acquisition of an oil field in Kazakhstan is falling apart. US energy giant ConocoPhillips had agreed to sell its 8.4 per cent holding in the Kashagan project to ONGC. However, the Kazakh government, which has a right of first refusal, is ready to exercise an option to step in and buy that stake. Reports from Almaty say the Kazakh government is planning to partner a Chinese company for the project.

Bharat Petroleum owns 10 per cent stake in the Mozambique field. Bankers say its announcement of a new natural gas accumulation would give a fillip to the valuation of the entire field, and this might top the $5-billion offer by OVL and Oil India in the first round of auctions. "The new discovery has just changed the game. The valuation could be a surprise, as many are predicting the valuation of the entire field has gone up manifold," said a banker.

If the Indian companies buy 20 per cent more stake from Videocon and Anadarko, they would emerge as the single-largest stake owner in the company, as Bharat Petroleum already owns 10 per cent stake in the Mozambique company. Anadarko has 36.5 per cent stake, while Japan's Mitsui & Co is the second-biggest stake holder in the block, with 20 per cent stake. Thai firm PTT has an 8.5 per cent stake, while the Mozambique government-owned ENH owns 15 per cent.

ONGC contributes about two-thirds to India's crude oil output. Under its 'perspective plan 2030', it plans to invest Rs 11 lakh crore to double production and treble revenues by 2030.

The plan also includes four-fold growth in market capitalisation and six-fold growth in production from international operations. In 2011-12, the company produced 23.71 million tonnes of oil and 23.32 billion cubic metres (bcm) of gas. In the same period, OVL produced 6.21 million tonnes of oil and 2.54 bcm of gas.

Earlier, Sudhir Vasudeva, chairman and managing director of ONGC, had said OVL would consider investment opportunities in four to five international hubs where it the entity could achieve adequate growth and source 60 million tonnes of oil and oil-equivalent gas a year by 2030.

In March 2012, ONGC had signed a memorandum of understanding (MoU) with ConocoPhillips for shale gas and deepwater exploration. It had also signed an MoU with China National petroleum Corporation for cooperation in the hydrocarbon sector, including midstream and downstream.