OVL-OIL buying Videocon's stake in Mozambique's Rovuma for $2.48 bn

OVL-OIL to acquire Videocon's stake in Mozambique offshore block for $2.48 bn

ONGC Videsh Limited (OVL) and Oil India Limited (OIL) have agreed to acquire the 10-per cent participating interest of Videocon group in the giant Rovuma Area 1 offshore block in Mozambique for $2.48 billion.

OVL, the overseas arm of sate-run explorer Oil and Natural Gas Ltd (ONGC), and another state-run oil company OIL have signed definitive agreements with Videocon Mauritius Energy Limited to acquire the entire stake of Videocon Mozambique Rovuma 1 Limited, the company that holds a 10-per cent participating interest in Rovuma Area 1 offshore block.

The acquisition will be made via a newly incorporated entity in which OVL and OIL are expected to hold 60 per cent and 40 per cent stakes respectively.

The acquisition is subject to the approvals of the governments of Mozambique and India, relevant regulatory approvals, pre-emption rights and other customary conditions and OVL expects the transaction to close in the fourth quarter of 2013.

Rovuma Area 1 covers approximately 2.6 million acres in the deep-water Rovuma Basin offshore Mozambique and represents the largest gas discovery in offshore East Africa with estimated recoverable reserves of 35 to 65 trillion cubic feet.

The partners in Area 1 include Anadarko, operator of the project, ENH, Mitsui, BPCL and PTTEP. Area 1 has the potential to become one of the world's largest LNG producing hubs with first LNG expected by 2018.

The Area 1 LNG project is strategically located to supply LNG to India at a competitive price. Participation of OVL and OIL in the project will facilitate access of LNG to the growing Indian gas market. OVL and OIL will need to invest in technical resources for developing the project.

"The acquisition would mark OVL's entry into this emerging world-class offshore gas basin with significant future upside potential, and is consistent with OVL's strategic objective of adding high quality international assets to its existing E&P portfolio," OVL said in a release.

"The project would also be an important milestone in reaching OVL's long-term production targets of 20 MMTOE by FY'18 and 60 MMTOE by FY'30," it added.

''Considering the growing importance of natural gas in the primary energy basket, this acquisition is a significant step by OVL/ONGC group towards the energy security of our country'', said OVL chairman Sudhir Vasudeva,

Bank of America Merrill Lynch is acting as financial adviser and Simmons & Simmons is the legal adviser. Ernst & Young is acting as tax and accounting adviser and Robertson (UK) Ltd is the technical adviser to OVL.