OVL set to pick 33% in Egyptian bloc
The Cabinet is likely to clear $380-mn buyout proposal which has estimated gas reserves of around 14 tcf.
By Rajeev Jayaswal, TNN |
NEW DELHI: ONGC’S foreign arm ONGC Videsh (OVL) is all set to acquire around 33% stake in Shell’s high-prospective block in the Northeast Mediterranean deepwater (Egypt).
The Union Cabinet may approve OVL’s proposed investment of $380 million to pick up the stake in the block which has estimated gas reserves of around 14 trillion cubic feet (tcf). The size is stated to be approximately the same as Reliance’s approved gas find in the KG Basin. The block is expected to start production by 2012.
OVL will, however, be required to take separate approval from the government for further investments towards developing the hydrocarbon field. It has been made clear that the government will not provide additional budgetary support to OVL.
“ONGC may provide funds to its subsidiary for acquiring and participation of the project without seeking budgetary support,” an official source said. The Cabinet Committee on Economic Affairs meeting scheduled for Thursday is expected to take a final decision in this regard.
The block is currently held by Shell (84%) and Petronas of Malaysia (16%). In 1999, Shell was awarded the Northeast Mediterranean deepwater concession, which is located to the north of the Nile Delta, in water depths of between 800 and 2,800 meters.
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Shell and its partner have already spent about $300 million in exploring the field. Out of over half a dozen wells drilled in the field, two have resulted in gas discoveries, confirming the potential of the concession. According to sources, Royal Dutch Shell had offered OVL up to 33% stake in the undersea acreage in Egypt. OVL has been awaiting government’s approval to seal the deal. OVL has committed to invest $380 million on the appraisal and exploration of the acreage with a 20% escalation factor. OVL will, however, not pay the 33% share of about $300 million already spent by Shell and Petronas in exploration activities.
Government approval will help the company clinch the deal as any delay on its part may give a chance to Petronas to block OVL’s participation by matching the deal.
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