OVL in Talks to Import LNG at $15 from Mozambique

ONGC Videsh, which holds a minority interest in Anadarko-operated giant gas field in Mozambique, is in talks with the consortium to import liquefied natural gas (LNG) for $15 per unit, managing director SP Garg said.

“Price is about $13-14 (per unit) as per the consortium’s pricing formula. About $1 would be additional cost for transportation etc,” Garg said. The consortium’s gas pricing formula is based on a combination of JCC (Japan customs-cleared crude) and Henry Hub, the benchmark rates for oil and gas. ONGC Videsh (OVL) has 16% stake in the Rovuma Area-1 project. Other state-run Indian oil companies—Oil India and Bharat Petroleum Corporation—together hold 14%.

Garg said the gas marketing right is with the Anadarko-led consortium, where Indian firms are also members, but partners have to negotiate capacity purely on commercial terms.

The consortium, which is setting up huge LNG facilities in gas-rich Mozambique, has already contracted the first LNG train of 5.5 million tonne to Chinese, Thai and Japanese importers. Even part of the train-II capacity is booked by them.

OVL is in discussion with the consortium to book some capacity, which will depend on availability of transpiration facilities, he said. “India is one of the biggest LNG importers in the region. Geographically, it is natural market for the Mozambique gas, but transportation is an issue because we don’t have enough LNG carriers,” he said.

First gas from Mozambique field is expected from December 2018, Garg said. The consortium has recently upgraded reserves of the block to 45-70 trillion cubic feet from 35-65 tcf post two new discoveries in December last year.

OVL recently acquired Videocon's 10% stake in Mozambique's Rovuma Area-1 for $2.47 billion together with Oil India, which holds 4% interest. Later, it independently bought another 10% stake in the same field from American oil company Anadarko Petroleum Corporation for $2.64 billion. OVL spent over $4.12 billion in the acquisitions.

Garg said OVL borrowed money from the market to fund the acquisitions for the first time. Earlier, it used to fund its projects through its cash-rich parent, ONGC.

OVL plans to raise a $500-700 million loan by pledging future crude oil production from its overseas assets to fund acquisitions, he said.

The company had raised some short-term loans of $1.5 billion for acquiring stakes in Mozambique and now wants to retire those debts.

“We are exploring various options including raising funds through US dollar bonds and Eurobonds. We also have option of taking loan against sale of crude oil,” he said.

Garg said OVL has achieved 8.36 million tonnes of oil and oil equivalent output in 2013-14, which is 11% more than the previous year, because of acquiring producing properties that year.

He said interpretation of fresh data has shown better prospects in Block-128 in Vietnam and it is looking for a strategic partner for the South China Sea block.

“We are talking to Petro Vietnam and some other companies,” Garg said. OVL has 100% stake in the controversial exploration block, which is claimed by China as part of its territory.

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