A Review of the Nigerian Energy Industry

Oil India, ONGC to buy Mozambique gas stake

ongc25 June 2013, New Delhi – State run Oil India Limited and Oil & Natural Gas Corporation said, Tuesday they will pay $2.48 billion for a 10% stake in an offshore Mozambique gas field, just one week before the deadline for an ONGC bid for Kazakhstan oil assets costing more than twice this amount.

The two ventures underscore the urgency India is showing in acquiring foreign oil and gas overseas to help bridge its growing energy deficit and import bills. ONGC said last year it will need to invest as much as $20 billion to realize its target of a sevenfold increase in oil and gas output from overseas by 2030.

The Kazakh government is due to announce by July 2 whether it has approved ONGC’s purchase of ConocoPhillips’ 8.4% stake in the huge Kashagan oil and gas field for $5.5 billion, which is being developed by a consortium of international oil companies, India’s oil minister said recently.

Oil India and ONGC’s overseas unit, ONGC Videsh Limited, said they will buy Videocon Mozambique Rovuma 1 Limited, a unit of Videocon Industries Limited, which owns 10% of the highly prospective Rovuma-1 gas field off Mozambique coast.

The field, which holds massive proven reserves of natural gas deep under the seabed, has already been the subject of international jostling as the partners line up the financing and expertise to develop it.

Operator Anadarko Petroleum Corporation, is looking to sell 10% of the venture while last year Thailand’s PTT Exploration & Production PCL outbid Royal Dutch Shell Plc in buying an 8.5% share owned by Cove Energy.

The Indian acquisition is subject to approvals from the Mozambique and Indian governments and pre-emption rights of other companies in the project, which also include India’s Bharat Petroleum Corporation and Japan’s Mitsui & Company.

Oil India expects to complete the deal by the fourth quarter of 2013, it said in a regulatory filing. The Mozambique project is estimated to hold recoverable gas resources of between 35 trillion cubic feet and 65 trillion cubic feet, it said.

ONGC said the Rovuma project is strategically located to supply liquefied natural gas India at a competitive price.

“Considering the growing importance of natural gas in the primary energy basket, this acquisition is a significant step by ONGC Videsh towards the energy security of our country,” said ONGC chairman Sudhir Vasudeva.

India imports about a quarter of its natural gas requirement, and domestic gas output is falling.

Separately, if the Kazakhstan plan gets approved, it will help India offset its huge crude-oil import bill. India now imports 73% of its energy needs. It imported crude and other oil products worth $155 billion in the financial year that ended March 31.

“East Africa is coming up as the hottest energy destination. All the major energy companies are there. Entry of more Indian companies in Mozambique, given the country’s dependence on energy imports and falling local output, is indeed a good news,” said Praveen Kumar, head of south Asia at consultancy FACTS Global Energy in Singapore.

“The kind of money we are talking about for such energy deals is huge. The state-run companies have deep pockets and also the government backing so I don’t see a problem funding wise,” he said.

Production at the Kashagan field, which is years behind schedule and running over budget, is due to start by October at an initial 75,000 barrels a day, rising to 370,000 barrels a day within a year of that, Italian company Eni SpA said in May.

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