ONGC Videsh with Asian rivals is in race for Videocon stake in African gas field

MUMBAI: Indianenergy major ONGC Videsh (OVL) 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 Dhootcontrolled 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 of Videocon Industries said confidentiality agreements prevented him from commenting.

“I cannot comment on specifics as I have entered into confidentiality agreements,” said Venugopal Dhoot, chairman, Videocon Industries. 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” kickstart 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 Energ,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 ExxonMobil 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.