India's Oil and Natural Gas Corp (ONGC.NS)
has agreed to buy 10 percent in a gas field offshore Mozambique
from Anadarko Petroleum Corp for $2.64 billion, as the explorer looks to
offset diminishing supplies from domestic gas fields by buying overseas
assets.
The purchase of U.S. oil company Anadarko's
(APC.N) stake is the latest in a handful of overseas assets that ONGC
Videsh, the overseas businessunit of state-controlled ONGC, has bought
in the last couple of years to boost India's energy needs.
In June, ONGC and state-run Oil India Ltd
(OILI.NS) signed a deal to buy a 10 percent stake in a Mozambique gas
field from Videocon Group (VEDI.NS) for $2.48 billion.
"There is a lot of energy demand and
whatever volumes of gas we are able to bring to the country are of
utmost significance," A. K. Srinivasan, ONGC's group general manager
for finance, told Reuters. "Mozambique will be a big LNG hub for the
future."
Anadarko said it would remain the operator
of Area 1, with a working interest of 26.5 percent in the block, which
is located in Mozambique's deepwater Rovuma Basin.
Recent discoveries have turned the Rovuma
field into a major draw for global energy producers and boosted
Mozambique's natural gas reserves to around 150 trillion cubic feet or
enough to supply Japan, the world's top LNG importer, for 35 years.
Rovuma has the potential to become one of
the world's largest liquefied natural gas (LNG) producing hubs by 2018,
and is strategically located to supply gas to India at competitive
prices.
SEEN CLOSING BY MARCH 2014
ONGC, which expects the cash transaction to
close by March 2014, is likely to finance the deal through internal
cash balance and fresh borrowings, Srinivasan said, adding that
financing details would be finalized over the next few months.
The company's bonds were trading at
marginally wider spreads on Monday, underperforming tightness in the
market, and shares fell as much as 3.8 percent in the Mumbai
market .NSEI that was trading flat, on worries about its higher debt
levels.
Analysts expect ONGC's two recent acquisitions to lead to higher debt levels, although a credit downgrade is unlikely.
"Given current market conditions and
uncertainty about India, financing may be a challenge and we think most
of it will come from the bank market. That said, a potential bond
activity cannot be ruled out," a U.S. bank said in a note.
STARVING FOR GAS
ONGC, which has struggled to maintain
output from its ageing wells off India's west coast, will be interested
in buying more overseas assets to feed the energy needs of Asia's
third-largest economy, Srinivasan said, but declined to give details.
"The country is starving for gas, for our power development and any other development," he said.
Demand for gas in India far outstrips
consumption, but prices have been kept low for strategic industries,
deterring investment in the sector. India has few energy resources other
than coal and is the world's fourth-biggest importer of fuel.
After Anadarko, which has been looking to
focus more on its domestic assets, Japan's Mitsui & Co Ltd is the
second-biggest holder in Mozambique's offshore Area 1 block, with a
stake of 20 percent.
Indian state refiner Bharat Petroleum Corp
(BPCL.NS) owns 10 percent while Thai state oil company PTT Exploration
and Production PCL PTTE.BK has an 8.5 percent interest and Mozambique's
state-owned ENH 15 percent.
Outbound announced deals involving Indian
companies so far this year stand at $35.8 billion, compared to $62
billion last year and a record $70.3 billion in 2008, Thomson Reuters
data shows.
Bank of America Merrill Lynch (BAC.N) advised ONGC Videsh and Citigroup (C.N) advised Anadarko on the transaction.
Reporting
by Sumeet Chatterjee and Michael Erman; Additional reporting by Umesh
Desai and Denny Thomas in HONG KONG; Editing by G Crosse and Clarence
Fernandez (C) Reuters 2013.
Post to be found at:
http://www.maritime-executive.com/article/Indias-ONGC-to-Buy-264Billion-Stake-in-Anadarko-Mozambique-Gas-Block-2013-08-26/
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