New Delhi, Aug. 26: ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation, plans to take dollar loans to buy a 10 per cent stake from US energy major Anadarko Petroleum Corp in an offshore gas field in Mozambique for $2.64 billion.
“Much of the debt will be in dollars considering the volatility in the rupee. The rest will be funded through internal accruals,” senior OVL officials said.
“The funding will be a mixture of internal and external resources, including overseas borrowings. The dollar funding could help avoid the impact of the fluctuating rupee. However, the amount of the mix is a strategic decision, which we will take at relevant times,” OVL managing director D.K. Sarraf said.
Analysts said the company’s strategy of dollar debt was right as the rupee had depreciated about 15 per cent this year. Moreover, the earning would be in dollars, so funding the projects in dollars in such volatile conditions made sense.
In a statement, OVL said it had signed agreements to buy a 10 per cent stake from Anadarko in Mozambique’s offshore Rovuma Area 1. Up to 65 trillion cubic feet of gas reserves are to be converted into LNG (liquefied natural gas) to be transported by ships to markets such as India.
The project is strategically located to supply LNG to India at a competitive price, OVL said.
“OVL will own a significant interest in this strategic project in Mozambique,” ONGC chairman and managing director Sudhir Vasudeva said.
“Area 1 has the potential to become one of the world’s largest LNG projects and today’s acquisition marks a further significant step by OVL/ONGC group towards the energy security of our country.”
Texas-based energy exploration company Anadarko will continue to be the operator of the block, with its stake reduced to 26.5 per cent from 36.5 per cent after the deal.
The Area 1 partners as well as Italian oil company Eni SpA, which operates an adjacent field, will jointly develop the world’s biggest LNG project with deliveries beginning in 2018.
The project with capacity to produce 20 million tonnes of LNG annually will be the world’s largest LNG export site after ExxonMobil-run Ras Laffan in Qatar.