ONGC cautions against listing of Videsh arm, cites Mozambique asset trouble

The DIPAMhad been pushing for the listing of the ONGC arm to meet the divestment target of Rs 80,000 crore for the current financial year

When the board of Oil and Natural Gas Corporation (ONGC) red-flagged the listing of ONGC Videsh (OVL) last month, a major roadblock it highlighted was the start of production in Mozambique. 

A final investment decision (FID) on the project is likely this quarter, a government official said. Without giving any timeline, OVL Managing Director N K Verma said, “A decision on this is likely very soon. After the FID, the project will take at least 38-40 months to start production.”

The Department of Investment and Public Asset Management (DIPAM) had been pushing for the listing of the ONGC arm to meet the divestment target of Rs 80,000 crore for the current financial year. As on December 28, the government has realised only Rs 34,142.35 crore as disinvestment proceeds. With only a quarter left, it was pushing for listing of more public sector undertakings (PSUs). 

To this, the ONGC board had cited that market conditions are not right for an oil and gas exploration and production from major assets, such as Mozambique, will start only from 2022. OVL is expected to invest around $4.5 billion to develop Golfinho-Atum field in the Rovuma Area 1 Offshore Block. 

This is one of the largest natural gas projects in Africa, with a capacity of 12 million tonne per annum. Anadarko is the operator of the liquefied natural gas project, with 26.5 per cent stake. Other companies include Japanese company Mitsui (20 per cent), PTT of Thailand (8.5 per cent), three Indian companies, ONGC Videsh (16 per cent), Bharat Petro Resources (10 per cent) and Oil India (four per cent), and Mozambique's own National Hydrocarbon Company, ENH (15 per cent). 

“The project may see investment of about $12 billion. Indian companies have around 30 per cent share of the 12 MTPA,” said a government official, adding the FID was getting delayed as the project needed to reach a particular level of production to do so. The Golfinho-Atum project will also supply initial volumes of about 100 million cubic feet of natural gas per day for domestic sales for Mozambique’s industrial development, which will have a significant socio-economic impact. 

During the 2017-18 financial year, the overall production of OVL was 14.164 million tonnes of oil equivalent (MTOE). In December, Anadarko reportedly entered an offtake agreement with Japan's Tohuku Electric Power Company. The Japanese major has committed to buying 280,000 tonnes of LNG per year for a 15-year period. 

Meanwhile, ONGC Chairman and Managing Director Shashi Shankar said the company board has not received any information from Dipam to reconsider the OVL listing plan.