The consortium of ONGC Videsh Limited (OVL) and Oil India Ltd (OIL) on Tuesday announced the signing of definitive agreements with Videocon Mauritius Energy Ltd to acquire 100 per cent shares in Videocon Mozambique Rovuma 1 Ltd. This company in turn holds a 10 per cent share in the Rovuma Area 1 Offshore Block, which lies off the coast of Mozambique. The OVL-OIL consortium paid $2.475 billion. The deal was signed in Singapore.
OIL's official spokesperson said the acquisition would be implemented through a newly incorporated special purpose vehicle jointly owned by OIL and OVL. "The acquisition is subject to 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," he added.
State owned BPCL already has a 10 per cent stake in the same block, through its foreign subsidiary, Bharat Petroleum Resources Ltd (BPRL).
The gas field covers approximately 2.6 million acres in the deepwater Rovuma Basin off Mozambique and is the largest offshore gas discovery in East Africa so far with estimated recoverable resources of 35 to 65 trillion cubic feet (TCF). OVL-OIL's other partners in the venture, apart from BPRL, include the US petro giant Anadarko Petroleum Corp, the operator of the project, and other global bigwigs such as ENH, Mitsui and PTTEP. The area has the potential to become one of the world's largest natural gas producing hubs with the first deliveries of liquefied natural gas (LNG) expected in 2018.
The project is strategically located to supply LNG to India, and OIL's and OVL's participation is likely to facilitate access. The supply will supplement the country's energy security endeavour. OIL and OVL will also devote significant financial and technical resources to the development of the project. This investment is expected to further enhance the strong business and cultural links between Mozambique and India.
OIL officials say the investment provides the company an early entry into one of the world's largest natural gas assets. It will significantly enhance OIL's reserves base. OIL's Chairman & Managing Director, S. K. Srivastava, said, "This acquisition is in line with our strategic 2020/21 plan which has strong focus on inorganic growth across the energy value chain. It will also provide us with firsthand experience of setting up and operating a deep water natural gas field and LNG plant, while further helping address the growing energy requirements of our country. This is a high quality world class asset with one of the largest discovered resource base, which combined with its locational advantage makes this is a highly attractive investment proposition for us."
T. K. Ananth Kumar (Director - Finance) and N. K. Bharali (Director - HR&BD) led the Oil India team during the negotiations.
OVL officials also reacted effusively to the deal. "Considering the growing importance of natural gas in the primary energy basket, this acquisition is a significant step by the OVL/ONGC group towards the energy security of our country," said Sudhir Vasudeva, Chairman, OVL.
The ONGC's spokesperson further added that the acquisition would mark OVL's entry into this emerging world-class offshore gas basin with significant future potential, and was consistent with OVL's strategic objective of adding high quality international assets to its existing exploration and production portfolio. The project would be an important milestone in achieving OVL's long-term production targets of 20 MMTOE by financial year 2017/18 and 60 MMTOE by financial year 2029/30.
ONGC/OVL also have reason to be relieved, considering they had prematurely announced the deal 10 days ago, causing all round embarrassment.