Energy major ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC) is set to battle it out with Asian rivals from China and Thailand as well as some of the biggest global names for Videocon Industries’ 10% stake in Mozambique’s Rovuma offshore block, the world’s biggest gas discovery in a decade.
From early February, a due diligence exercise to evaluate reserves and other financial and commercial details of the gas fields will begin, at least four people aware of the developments said. They sought anonymity as the talks are still private. According to them, at least six bidders have expressed initial interest. They are Shell, ExxonMobil, BP, Spain’s Repsol, China’s largest integrated energy powerhouse Petroleum & Chemical Corporation (Sinopec) and OVL which may team up with Oil India to form an Indian consortium.
An existing investor, Thailand’s state-owned PTT Exploration and Production Public Company Limited (PTTEP), which owns 8.5% stake in the field, may also bid to increase its economic interest. Last year, PTTEP trumped Shell and 20 other bidders including BP, Exxon Mobil and Chinese operators in a $1.91-billion deal with Cove Energy, a small UK explorer. That transaction is expected to have set the benchmark for the Videocon stake sale which, according to the people aware of the matter, could be close to $2.5 billion.
“On a comparative valuation with Cove, Videocon’s 10% interest should have a $2.15 billion – $2.25 billion valuation, but Videocon’s promoters are seeking a significant premium of almost $2.7 billion to $3 billion,” said an official briefed on the matter. Mozambique has turned out to be a windfall for the Venugopal Dhoot controlled Videocon, with the value of their investments multiplying exponentially within five years. Videocon had agreed to pay Anadarko Petroleum Corporation — the operator of the block with a 36.5% stake — a mere $75 million for its stake in 2008. Today, it is among the most prolific gas fields in the world.
When contacted, Venugopal Dhoot, chairman, Videocon Industries said confidentiality agreements prevented him from commenting. “I cannot comment on specifics as I have entered into confidentiality agreements,” he said. David Nicholas, head of BP Group Press Office said, “We never comment on speculation of this sort.” Ross Whittam, a Shell spokesperson, also declined to comment.
“As per our company policy, we do not comment on any specific opportunity that we may look at. These are competitive and sensitive information.” said DK Sarraf, MD, OVL. Mails sent to Sinopec, Repsol, ExxonMobil and PTTEP did not elicit a response till the time of going to press.” SK Srivastava, CMD, OIL did not respond to calls to his mobile phone.
But, one of the four person said that access to the data room in the first week of February would “formally” kick start the selloff process. “Most of the likely bidders were in the race just a year back when Cove Energy was selling its stake. After missing out last time, we expect OVL to be a lot more aggressive. They also have become bolder after their success in 2012 with 2 deals worth $6 billion,” the official added.
UBS and Standard Chartered Bank are advising Videocon. Both banks were involved last time around as well, advising PTTEP and Cove Energy, respectively. Interestingly, even Anadarko Petroleum is also looking at diluting up to 10% stake, depending on the final valuation and the credential of the suitor. “The existing partners in the consortium lack LNG expertise which a Shell or a Ex xonMobil can provide. Moreover a 20% stake is significant enough to make the deal a lot more attractive to larger players,” said a Mumbai-based oil and gas analyst tracking the development. There is a strategic reason why most are expecting an intense bidding war.
Mozambique today is a doorway to the resources-heavy East Africa, which is yet to be fully exploited. Geographically its proximity to the energy guzzling Asian markets makes it an even more attractive region. With expected recoverable gas reserves of close to 60 trillion cubic feet (tcf), Rovuma-1 alone is the most sought after global gas acreage today. Even at a 50% probability of recovery success –“P2 or proven plus probable reserves” in industry parlance – it’s a jaw dropping 42 tcf of natural gas. To put this in context, this is twenty times India’s current annual gas consumption.
But to extract and then market that gas will be a high-cost exercise, reason enough for Videocon to change its earlier plan of exporting to India and instead cash out. Currently the project envisions $20 billion of capex in both upstream and downstream-related investments. At least two to four natural gas liquefaction plants of five million tonnes, each with facilities to compress and purify them, are being planned along with a port and a jetty. Videocon, as a 10% partner, will have to bring in $2 billion of its proportionate share, if it were to stay on as a partner.
Videocon plans to use the money from the divestment to fund its oil and gas investments in Brazil and to bring down its high leverage in its Indian balance sheet. As on September 2012, its consolidated debt stood at Rs 26,334.99 crore.
In related news ONGC Videsh gets a nod to acquire stake in oil Azerbaijan assets. The Cabinet Committee on Economic Affairs has given its approval authorising ONGC Videsh Ltd's (OVL)'s acquisition of participating interests owned by Hess Corporation's wholly-owned subsidiaries in upstream and midstream oil and gas assets in Azerbaijan.
On September 8, 2012, OVL had announced it has signed definitive agreements for acquisition of Hess Corporation's 2.72 % participating interest in oil fields (Azeri, Chirag and Guneshli) in the Azerbaijan part of the Caspian Sea and 2.36 % interest in the Baku-Tbilisi-Ceyhan Pipeline (BTC) for $1 billion.
The CCEA authorised OVL to incur expenses so as to keep the total exposure up to the approved amount $1,001 million ($1 billion) at all times. The acquisition would mark OVL’s entry into oil-rich Azerbaijan. OVL is expecting to close the deal by the first quarter of 2013. ACG, which is located in the south Caspian Sea about 95 km off the coast of Azerbaijan, is the largest oil and gas field complex in that country and is one of the largest producing oil fields in the world.
BP operates ACG and is partnered by State Oil Company of Azerbaijan Republic (SOCAR), Chevron, Statoil, ExxonMobil, Inpex, Turkish NOC -TPAO and Itochu. Average daily production from the field is around 700,000 barrels of oil per day (bopd). The potential ultimate recovery from the field is estimated at over 5 billion barrels of oil. The 1,768-km BTC pipeline is one of the main export routes for Caspian crude oil production with a capacity of around 1 million bopd to the Ceyhan terminal in the Mediterranean Sea in South-East Turkey. This acquisition would bring nine percent additional proven reserves to OVL's portfolio, the company had said.
From early February, a due diligence exercise to evaluate reserves and other financial and commercial details of the gas fields will begin, at least four people aware of the developments said. They sought anonymity as the talks are still private. According to them, at least six bidders have expressed initial interest. They are Shell, ExxonMobil, BP, Spain’s Repsol, China’s largest integrated energy powerhouse Petroleum & Chemical Corporation (Sinopec) and OVL which may team up with Oil India to form an Indian consortium.
An existing investor, Thailand’s state-owned PTT Exploration and Production Public Company Limited (PTTEP), which owns 8.5% stake in the field, may also bid to increase its economic interest. Last year, PTTEP trumped Shell and 20 other bidders including BP, Exxon Mobil and Chinese operators in a $1.91-billion deal with Cove Energy, a small UK explorer. That transaction is expected to have set the benchmark for the Videocon stake sale which, according to the people aware of the matter, could be close to $2.5 billion.
“On a comparative valuation with Cove, Videocon’s 10% interest should have a $2.15 billion – $2.25 billion valuation, but Videocon’s promoters are seeking a significant premium of almost $2.7 billion to $3 billion,” said an official briefed on the matter. Mozambique has turned out to be a windfall for the Venugopal Dhoot controlled Videocon, with the value of their investments multiplying exponentially within five years. Videocon had agreed to pay Anadarko Petroleum Corporation — the operator of the block with a 36.5% stake — a mere $75 million for its stake in 2008. Today, it is among the most prolific gas fields in the world.
When contacted, Venugopal Dhoot, chairman, Videocon Industries said confidentiality agreements prevented him from commenting. “I cannot comment on specifics as I have entered into confidentiality agreements,” he said. David Nicholas, head of BP Group Press Office said, “We never comment on speculation of this sort.” Ross Whittam, a Shell spokesperson, also declined to comment.
“As per our company policy, we do not comment on any specific opportunity that we may look at. These are competitive and sensitive information.” said DK Sarraf, MD, OVL. Mails sent to Sinopec, Repsol, ExxonMobil and PTTEP did not elicit a response till the time of going to press.” SK Srivastava, CMD, OIL did not respond to calls to his mobile phone.
But, one of the four person said that access to the data room in the first week of February would “formally” kick start the selloff process. “Most of the likely bidders were in the race just a year back when Cove Energy was selling its stake. After missing out last time, we expect OVL to be a lot more aggressive. They also have become bolder after their success in 2012 with 2 deals worth $6 billion,” the official added.
UBS and Standard Chartered Bank are advising Videocon. Both banks were involved last time around as well, advising PTTEP and Cove Energy, respectively. Interestingly, even Anadarko Petroleum is also looking at diluting up to 10% stake, depending on the final valuation and the credential of the suitor. “The existing partners in the consortium lack LNG expertise which a Shell or a Ex xonMobil can provide. Moreover a 20% stake is significant enough to make the deal a lot more attractive to larger players,” said a Mumbai-based oil and gas analyst tracking the development. There is a strategic reason why most are expecting an intense bidding war.
Mozambique today is a doorway to the resources-heavy East Africa, which is yet to be fully exploited. Geographically its proximity to the energy guzzling Asian markets makes it an even more attractive region. With expected recoverable gas reserves of close to 60 trillion cubic feet (tcf), Rovuma-1 alone is the most sought after global gas acreage today. Even at a 50% probability of recovery success –“P2 or proven plus probable reserves” in industry parlance – it’s a jaw dropping 42 tcf of natural gas. To put this in context, this is twenty times India’s current annual gas consumption.
But to extract and then market that gas will be a high-cost exercise, reason enough for Videocon to change its earlier plan of exporting to India and instead cash out. Currently the project envisions $20 billion of capex in both upstream and downstream-related investments. At least two to four natural gas liquefaction plants of five million tonnes, each with facilities to compress and purify them, are being planned along with a port and a jetty. Videocon, as a 10% partner, will have to bring in $2 billion of its proportionate share, if it were to stay on as a partner.
Videocon plans to use the money from the divestment to fund its oil and gas investments in Brazil and to bring down its high leverage in its Indian balance sheet. As on September 2012, its consolidated debt stood at Rs 26,334.99 crore.
In related news ONGC Videsh gets a nod to acquire stake in oil Azerbaijan assets. The Cabinet Committee on Economic Affairs has given its approval authorising ONGC Videsh Ltd's (OVL)'s acquisition of participating interests owned by Hess Corporation's wholly-owned subsidiaries in upstream and midstream oil and gas assets in Azerbaijan.
On September 8, 2012, OVL had announced it has signed definitive agreements for acquisition of Hess Corporation's 2.72 % participating interest in oil fields (Azeri, Chirag and Guneshli) in the Azerbaijan part of the Caspian Sea and 2.36 % interest in the Baku-Tbilisi-Ceyhan Pipeline (BTC) for $1 billion.
The CCEA authorised OVL to incur expenses so as to keep the total exposure up to the approved amount $1,001 million ($1 billion) at all times. The acquisition would mark OVL’s entry into oil-rich Azerbaijan. OVL is expecting to close the deal by the first quarter of 2013. ACG, which is located in the south Caspian Sea about 95 km off the coast of Azerbaijan, is the largest oil and gas field complex in that country and is one of the largest producing oil fields in the world.
BP operates ACG and is partnered by State Oil Company of Azerbaijan Republic (SOCAR), Chevron, Statoil, ExxonMobil, Inpex, Turkish NOC -TPAO and Itochu. Average daily production from the field is around 700,000 barrels of oil per day (bopd). The potential ultimate recovery from the field is estimated at over 5 billion barrels of oil. The 1,768-km BTC pipeline is one of the main export routes for Caspian crude oil production with a capacity of around 1 million bopd to the Ceyhan terminal in the Mediterranean Sea in South-East Turkey. This acquisition would bring nine percent additional proven reserves to OVL's portfolio, the company had said.
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