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ONGC Videsh eyes additional 10 percent stake in Mozambique block

MUMBAI: ONGC Videsh, fresh after buying Videocon's 10% stake in the gas-rich Rovuma basin in Mozambique, has bid for an additional 10% stake in the basin held by US-based Anadarko Petroleum, the block's operator. 

"We have put in a bid for Anadarko's 10% stake. This time we are going alone, we do not have 
Oil IndiaBSE -3.33 % with us," said DK Sarraf, the chairman and managing director of ONGC Videsh Ltd (OVL), the foreign unit of state-run Oil and Natural Gas Corp. 

Such deals are of strategic importance to India, which is trying to secure energy supplies for its growing needs. Sarraf did not give more details, but a person close to the development said that Anadarko is playing hard ball and demanding a higher valuation of close to $2.6 billion. 

"There are some tax implications that they want to be reimbursed for, so they are demanding higher valuations," the person, who is a senior executive of a public sector oil firm, told ET. 

The gas-rich Rovuma basin is one of the most coveted new energy assets in the world today, as it may hold as much as 35-65 trillion cubic feet of gas resources. It has the potential of becoming one of the world's largest LNG hubs after Qatar and Australia. 

Earlier this year, OVL and state-run Oil India had jointly bought Videocon's 10% stake in the block for $2.475 billion. The two companies have cleared the last hurdle in this acquisition as none of the other consortium partners in the gas blocks exercised their pre-emptive rights on the stake holding within the given deadline. 

Apart from Anadarko, which holds a 36.5% stake in the hydrocarbon blocks, the other consortium partners are 
Bharat PetroleumBSE -3.29 %, Empresa Nacional de Hidrocarbonetos of Mozambique, Mitsui of Japan and PTT Exploration and Production of Thailand. 

"None of the partners has had a problem or exercised their preemptive rights, so the road is clear, now the matter will be decided by the CCEA," Sarraf said. 

The senior oil sector executive quoted earlier said, "In case a decision is taken on OVL acquiring Anadarko's 10% stake also, then both matters will first go to an empowered committee of secretaries and then to the CCEA." 

If both deals go through, they will together account for OVL's largest global investment till now. OVL plans to invest about $1.5 billion for Videocon's stake and close to $2.6 billion for Anadarko's stake. India is likely to receive about six million tonnes of gas per annum once production commences in this basin in Mozambique. 

"Gas production from the Rovuma basin should commence by 2018 with an initial production of 10 mtpa, which will go up to around 30 mtpa by 2024, so with our 10% stake now and Bharat Petroleum's 10% stake in the basin, we can easily ship close to 6 mtpa to India," said T 
Ananth Kumar, CFO of Oil India. "Over the next five years, we will be investing an additional $2.5 billion in this project, as we will also be partnering in the upcoming LNG infrastructure," he added.