* ONGC expects cash transaction to close by next March
* ONGC seeks more overseas acquisition opportunities
* Anadarko to remain operator of Area 1 with stake of 26.5
MUMBAI/NEW YORK, Aug 25 India's Oil and Natural
Gas Corp has agreed to buy 10 percent in a gas field
offshore Mozambique from Anadarko Petroleum Corp for $2.64
billion, as the explorer looks to offset diminishing supplies
from domestic gas fields by buying overseas assets.
The purchase of U.S. oil company Anadarko's stake is
the latest in a handful of overseas assets that ONGC Videsh, the
overseas business unit of state-controlled ONGC, has bought in
the last couple of years to boost India's energy needs.
In June, ONGC and state-run Oil India Ltd signed a
deal to buy a 10 percent stake in a Mozambique gas field from
Videocon Group for $2.48 billion.
"There is a lot of energy demand and whatever volumes of gas
we are able to bring to the country are of utmost significance,"
A. K. Srinivasan, ONGC's group general manager for finance, told
Reuters. "Mozambique will be a big LNG hub for the future."
Anadarko said it would remain the operator of Area 1, with a
working interest of 26.5 percent in the block, which is located
in Mozambique's deepwater Rovuma Basin.
Recent discoveries have turned the Rovuma field into a major
draw for global energy producers and boosted Mozambique's
natural gas reserves to around 150 trillion cubic feet or enough
to supply Japan, the world's top LNG importer, for 35 years.
Rovuma has the potential to become one of the world's
largest liquefied natural gas (LNG) producing hubs by 2018, and
is strategically located to supply gas to India at competitive
ONGC, which expects the cash transaction to close by March
2014, is likely to finance the deal through internal cash
balance and fresh borrowings, Srinivasan said, adding that
financing details would be finalised over the next few months.
The company's bonds were trading at marginally wider spreads
on Monday, underperforming tightness in the market, and shares
fell as much as 3.8 percent in the Mumbai market that
was trading flat, on worries about its higher debt levels.
Analysts expect ONGC's two recent acquisitions to lead to
higher debt levels, although a credit downgrade is unlikely.
"Given current market conditions and uncertainty about
India, financing may be a challenge and we think most of it will
come from the bank market. That said, a potential bond activity
cannot be ruled out," a U.S. bank said in a note.
STARVING FOR GAS
ONGC, which has struggled to maintain output from its ageing
wells off India's west coast, will be interested in buying more
overseas assets to feed the energy needs of Asia's third-largest
economy, Srinivasan said, but declined to give details.
"The country is starving for gas, for our power development
and any other development," he said.
Demand for gas in India far outstrips consumption, but
prices have been kept low for strategic industries, deterring
investment in the sector. India has few energy resources other
than coal and is the world's fourth-biggest importer of fuel.
After Anadarko, which has been looking to focus more on its
domestic assets, Japan's Mitsui & Co Ltd is the second-biggest
holder in Mozambique's offshore Area 1 block, with a stake of 20
Indian state refiner Bharat Petroleum Corp owns 10
percent while Thai state oil company PTT Exploration and
Production PCL has an 8.5 percent interest and
Mozambique's state-owned ENH 15 percent.
Outbound announced deals involving Indian companies so far
this year stand at $35.8 billion, compared to $62 billion last
year and a record $70.3 billion in 2008, Thomson Reuters data
Bank of America Merrill Lynch advised ONGC Videsh
and Citigroup advised Anadarko on the transaction.