India Group Said Top Bid for $6 Billion Mozambique Gas

State-backed Oil & Natural Gas Corp. (ONGC) and Oil India Ltd. (OINL) are the leading joint bidders for the stake in a Mozambique gas field being sold by Anadarko Petroleum Corp. (APC) and Videocon Industries Ltd. (VCLF), three people with knowledge of the discussions said.

A deal may value the 20 percent holding in the Rovuma-1 offshore block at $5 billion to $6 billion, said one of the people, who asked not to be identified because the matter is private. ONGC and Oil India, both controlled by India’s government, are bidding together for the asset, and a successful bid would be the largest Asian investment in Africa since at least 2007, according to data compiled by Bloomberg.

“The valuation is not cheap, but it still makes sense because Mozambique LNG could go a long way in supplying India’s energy needs,” said Neelabh Sharma, an analyst at BOB Capital Markets Ltd. in Mumbai, referring to liquefied natural gas.

A successful bid by the Indian group would mark the third major Mozambique deal in less than a year by a state-controlled Asian energy company, following transactions by China National Petroleum Corp. and Thailand’s PTT Exploration and Production Pcl. The acquisitions show Asian governments’ determination to to supply some of the world’s fastest-growing economies with gas reserves.

Total’s Withdrawal

Total SA (FP), Europe’s third-biggest oil company, studied a bid for the stake and decided not to make an offer, Chief Financial Officer Patrick de la Chevardiere said last week, citing the risk of cost overruns and project delays.

ONGC Chairman Sudhir Vasudeva, Oil India Chairman S.K. Srivastava and Videocon Chairman Venugopal Dhoot didn’t answer calls to their mobile phones seeking comment. Anadarko officials didn’t return a call made outside normal office hours in Houston.

Mozambique’s Indian Ocean coast holds fields which are estimated to have enough gas to meet global demand for two years, attracting investment from energy companies in Asia, Europe and North America. Rovuma-1’s potential reserves are greater than what Libya has in proven deposits, according to data from The Woodlands, Texas-based Anadarko, the operator of the block.

Increasing Confidence

The project is on track to be the largest-ever liquefied natural gas development without a so-called supermajor energy company leading the work, reflecting Asian players’ increasing confidence in taking the lead. LNG plants need billions of dollars in investment before they are able to super-cool gas into a liquid to load it onto tankers for shipment.

At a planned capacity of 20 million tons annually, the Mozambique project could be the world’s second-largest LNG export site after Ras Laffan in Qatar, where Exxon Mobil Corp. is a partner.

ONGC shares fell 0.7 percent in Mumbai today to 327 rupees, while Oil India gained 0.1 percent to 549.9 rupees.

The Indian group’s discussions with Anadarko and Videocon aren’t exclusive, meaning the sellers could still accept a higher offer from another company, one of the people said. A deal could be announced within a few weeks pending government approvals, another person said.

Natural Hedge

CNPC, China’s largest oil producer, last month agreed to buy a 20 percent stake in Mozambique’s Area 4 for $4.2 billion from Eni SpA. (ENI) The block, which neighbors Rovuma-1, may contain 75 trillion cubic feet of gas, or more than Norway’s existing reserves, according to the Chinese company. Without sufficient onshore supplies of its own, Asia consumes more LNG than any other region, so owning the producing assets is a natural hedge against rising prices.

With Mozambique’s per capita gross domestic product lower than Rwanda’s, the stakes are high. The country has little experience in managing mineral wealth and is still building ports, roads and railway lines. Rio Tinto Group had to write down 70 percent of its $4 billion investment in Mozambique’s coal industry because of a lack of transport capacity and a drop in the price of the fuel.

To contact the reporters on this story: Zijing Wu in Hong Kong at zwu17@bloomberg.net; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

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