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ONGC, Shell set to split $6bn gas buy

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MUMBAI: Oil and Natural Gas Corporation (ONGC) and Royal Dutch Shell will equally split the prized 20% stake acquisition in Rovuma basin gas block in Mozambique, after the sellers decided to court individual buyers due to difference in priorities.

The stake on offer is valued between $5-6 billion. Indian conglomerate Videocon Industries, which is selling 10% shares, wants to maximize the value. US based Anadarko Petroleum, the operator of the block, is offloading an equal stake but wants a pedigree global partner with better track record and execution skills.

ONGC is the frontrunner to pick up the Videocon stake while Royal Dutch Shell might end up buying Anadarko shares. The Videocon stake sale to ONGC may be announced next month. Anadarko sale to Shell is likely to take more time.

Videocon and Anadarko, which were planning to jointly sell their 10% each, have now asked the bankers to clinch deals separately.

“We are in talks with Videocon for its 10% stake. If Anadarko is willing to sell its 10% stake to us, we would buy it as well, ONGC chairman Sudhir Vasudeva told TOI. Videocon Industries chairman Venugopal Dhoot refused to comment citing confidentiality clause signed with the bankers.

ONGC has started final negotiations to buy Videocon stake. But Anadarko is ready to settle for a lower asking price as it wants to get Shell into the project because of its expertise and track record on execution of gas and projects.

“The Indian government is backing ONGC and wants Videocon to sell its 10% stake to ONGC. The state-owned giant needs to match the highest bidder to get Videocon’s 10% stake in the block,” said a source.

Anadarko and Videocon had put 10% stake each in the block up for sale and hired Standard Chartered and UBS as advisers in March. Both were to sell the stake jointly and the term sheet was also floated together.

Videocon and BPCL’s upstream subsidiary Bharat PetroResources hold 10% each in the Area 1 block, which is located in the Rovuma basin of Mozambique. Anadarko holds 36.5% interest in the block while PTT Exploration and Production Public Co of Thailand, Mitsui E&P, and Empressa Nacional de Hidrocarbonetos hold 8.5%, 20% and 15%, respectively.

The Area 1 block is estimated to hold up to 60 trillion cubic feet (tcf) of natural gas. Anadarko has already tied up with Italy’s Eni to build a common-use gas liquefaction plant.

Sharing the spoils

Videocon and Anadarko were earlier planning to jointly sell their 10% each The Indian govt wants Videocon to sell its 10% stake to ONGC, which may have to match the highest bid While ONGC wants to acquire Anadarko’s stake as well but the American co wants to offload its stake to a global partner with a better track record and execution skills.

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