Indian state owned oil and gas company ONGC’s $2.475bn purchase of Videocon’s 10% stake in a Mozambican gas field has come under government scrutiny following allegations that the company overpaid about $200mn, Press Trust of India reported February 12.
In 2013, OVL, the overseas arm of ONGC, signed the deal to buy 10% stake in the Anadarko-operated Area 1 offshore Mozambique, which covers approximately 2.6mn acres in the deepwater Rovuma Basin and holds 75 trillion ft³ of gas (at 100%) and is one of the largest finds off East Africa.
The 10% stake was then divided between OVL and Oil India in 60:40 ratio.
The deal has now come under the Indian oil ministry’s scrutiny following allegations that OVL may have overpaid Videocon. Government officials told Press Trust that the ministry has, in the past few months, asked ONGC to provide several details regarding the deal, including the basis of the valuation.
The ministry’s probe was acknowledged by senior company officials, who said details have been provided on multiple occasions, Press Trust added.
Sources said that Videocon in 2012 was willing to sell its stake to OVL at a small premium to the price that Thailand’s PTTEP paid to acquire an 8.5% stake in the same block from Cove Energy for $1.9bn. So the 10% stake, according to sources, was available to OVL for about $2.3bn; yet the company a year later paid $2.475bn to Videocon.
OVL followed the Videocon stake acquisition by picking up another 10% stake from Anadarko for $2.64bn in 2014. Currently, OVL has a 16% stake in Area 1. Oil India has a 4% share while another Indian state-owned energy firm BPCL has 10% stake.(source: Shardul Sharma at Naturalgasworld)