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GAIL taps Chevron for Indonesia buy

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  • Published 25.04.11

New Delhi, April 24: GAIL (India) Ltd is in talks with US energy major Chevron to acquire stakes in its deepwater natural gas blocks in Indonesia.

“Preliminary discussions have been held with the US firm. Chevron officials and Indonesia upstream regulator BPMIGAS will soon be coming to the country to hold further talks,” company sources said.

“The details on the amount of stake are yet to be worked out. The talks are at an early stage.”

Chevron plans to sell its stakes in two deepwater projects — Gendalo-Gehem and Bangka — in Indonesia. It plans to reduce its shares in the blocks this year to 55.1 per cent and 54 per cent, respectively, from 80 per cent, the firm said in its filing with the US Securities and Exchange Commission.

It had reached an agreement with China’s state-owned oil and gas company Sinopec to sell an 18 per cent stake in Gendalo-Gehem for $680 million.

At present, Chevron holds an 80 per cent stake with Italy’s Eni and Indonesia’s Pertamina owning the rest. The Indonesian regulator is yet to approve the sale to Sinopec.

Chevron has also sold some stake in Bangka but not revealed details.

It said, “During 2010, the company reached an agreement to farm out a portion of its working interest in the production sharing contracts of the two projects.”

Sources said GAIL would immensely benefit by acquiring a stake in the project.

The overseas asset acquisition will help it to access LNG for India. The equity participation in such upstream assets will act as a natural hedge to GAIL, which will also get to learn from a global player such as Chevron.

GAIL has expressed interest to take 30 million tonnes per annum of LNG from Chevron’s deepwater projects in Indonesia spread over a period of 13 years (2014-2026).

While production from the Gendalo-Gehem project will start in the third quarter of 2014 with 120 million standard cubic feet of gas per day (mmscfd), Bangka gas field will commence production in 2016 with an output of 1,120mmscfd and 55,000 barrels per day of oil condensate. The combined gas reserves in that area are estimated to be over three trillion cubic feet.

According to industry projections, India’s LNG import is estimated to rise three-fold to 129 million standard cubic metres per day (mmscmd) in 2015 from 48mmscmd in 2010.

Global consultancy firm McKinsey said the demand of gas was likely to rise to at least 230mmscmd and a maximum of 320mmscmd by 2015 from the current levels of 166mmscmd.