The government has approved ONGC Videsh Ltd and its partner Oil India Ltd acquiring a total of 20 per cent stake in a giant offshore gas field in Mozambique for over USD 5 billion.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), and OIL have been permitted by buy Videocon Group’s 10 per cent interest in the Rovuma Area-1 for USD 2.475 billion. Meanwhile, OVL on its own will acquire US energy major Anadarko Petroleum’s 10 per cent stake in the same block for USD 2.64 billion.

“The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved the acquisition of 20 per cent stake in Rovuma Area 1 Offshore Block in Mozambique (Area 1),” Oil Minister M. Veerappa Moily said on Friday.

A unit of Bharat Petroleum Corp Ltd (BPCL) already has a 10 per cent stake in the block which is estimated to hold up to 65 trillion cubic feet of gas reserves.

“This acquisition will help us meet our energy needs as gas in the block will be turned into LNG for sale into markets like India,” the minister said.

The two transactions are to close by February 2014.

Area 1 covers approximately 2.6 million acres in the deep-water Rovuma Basin and the acquisition would mark the entry of OVL and OIL into the largest gas discovery in offshore East Africa with estimated recoverable resources of 35 to 65 Tcf.

The acquisitions reflect the recent aggressiveness of Indian firms in securing energy assets abroad.

“Our standing instructions (to oil PSUs) is that we should reach (potential oil and gas opportunities) before China does,” Mr. Moily said.

Area 1 has the potential to be one of the world’s largest LNG producing hubs. “It is also ideally suited to supply LNG to India at a competitive price due to its location,” according to an official statement.

“Participation of OVL and OIL in the project will facilitate access of LNG to the growing Indian gas market. As the asset is near to India the shipping cost would be low compared to other LNG sources from the USA, Canada and Russia,” it said.

The resource accretion from this acquisition for 20 per cent interest would be around 10 Tcf which is about one-fifth of India’s present proven gas reserves.

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