The government on Thursday approved acquisition of 20 per cent stake by ONGC Videsh (OVL) and Oil India (OIL) in a giant Mozambique gas field
that is estimated to hold as much as 65 trillion cubic feet of gas.
The acquisition has been done in two parts -- OVL and OIL will jointly acquire Videocon's 10 per cent stake
for about $2.475 billion, while OVL, on its own, will acquire Andarko Petroleum's 10 per cent stake for $2.64 billion, an official statement said.
The Rovuma field-1 of Mozambique covers about 2.6 million acres in the deep-water Rovuma Basin and the acquisition would mark the entry of OVL and OIL into the largest gas discovery in offshore East Africa with estimated recoverable resources of 35 to 65 TCF, the statement said.
"The Cabinet Committee on Economic Affairs has approved the proposal of the Ministry of Petroleum and Natural Gas to authorize ONGC Videsh Ltd and Oil India Ltd to acquire 20 per cent participating interest in Rovuma Area 1 offshore block in Mozambique," the statement said.
For acquiring Videocon's stake, OVL-OIL combine had signed a definitive agreement on June 25. OVL is wholly-owned ONGC subsidiary and was created for acquiring assets abroad.
The deal to acquire Videocon's 10 per cent in the field stake is expected to be closed "before December 31 2013", while acquisition of Anadarko's 10 per cent stake is expected by February, 2014, it further said.
Partners in Area 1 include Anadarko, which is operator of the project, BNT-T -- the national oil company of Mozambique, Mitsui of Japan, BPRL -- a subsidiary of BPCL, Videocon and PTTEP -- the national oil company of Thailand.
Area 1 has the potential to be one of the world's largest liquified natural gas (LNG) producing hubs as discovered gas resources are to be monetized through the construction of a LNG hub in Mozambique.
It is also ideally suited to supply LNG to India at a competitive price due to its location. Participation of OVL and OIL in the project will facilitate access of LNG to the growing Indian gas market.
"As the asset is near to India the shipping cost would be low compared to other LNG sources from the USA, Canada and Russia," the statement said.
The resource accretion from this acquisition for 20 per cent stake would be around 10 TCF which is about 20 percent of India's present proven gas reserves, and is consistent with the strategic objective of OVL and OIL of adding high quality international assets to their existing exploration and production portfolio, it added.
US' Anadarko Petroleum, the operator of Rovuma-1 field, and Videocon had each launched an auction of their respective 10 per cent stakes in the Mozambique field earlier this year.
After signing the deal with Videocon in June, OVL had said the acquisition would mark its entry into the emerging world-class offshore gas basin with significant future upside potential.