Oil India, OVL to bid for Videocon's assets next week

Oil India in association with ONGC Videsh Limited (OVL) will make a bid to acquire 10% stake of Videocon Energy Ventures in Mozambique’s Rovuma basin, next week.

Banking sources close to the development said Oil India and OVL will make a bid next week. Videocon plans to raise around $3 billion (around Rs 16,000 crore) from the transaction which it will use to pay off debts.

Sources said ExxonMobil, PTT Exploration and Production Public Company Limited (PTTEP), Shell, BP, and China's Sinopec are also in the race.

Videocon had paid $75 million for the stake in Mozambique’s Rovuma-1 area in 2008.  Anadarko, which has 36.5% stake in the basin, is the operator. BPRL, the exploration and production arm of Bharat Petroleum Corporation owns 10% in the Rovuma basin. While Mitsui has 20%; Cove Energy owns 8.5%, and Mozambique ENH holds 15% in the basin.

Early this year, Anadarko announced recoverable gas in the range of 35 trillion cubic feet (tcf) to 65tcf from the basin.

The operator has already formed marketing teams, which will be talking to companies in Japan, South Korea, Taiwan and India to sell gas from the basin. To begin with, the consortium plans to sell only 10 million metric tonnes in two trains.

The two trains that the consortium will put in place would initially require around $18-20 billion, of which it would raise around $14 billion in long-term loans. The rest will be brought in by the consortium members in individual capacity. Further investments would be taken care of from the revenues the project brings.

The existing partners have roped in DeGolyer and MacNaughton a petroleum consulting company based in Dallas, Texas for reserve certification by 2013-end. Parallely, the players are working on the Front End Engineering Design (Feed) contract, which will lead to the engineering, procurement and construction (EPC) contract for construction of the liquefaction plant.

With Mozambique applying a 32% tax on future sales of local assets by foreign companies operating in the region, Videocon may have to shell out a significant amount as capital gains tax. This will be above the 12.8 percent rate applied to capital gains on the buy out of Cove Energy by Thailand's PTT Exploration and Production.