Royal Dutch Shell Plc has started discussions with Anadarko Petroleum Corp. over a bid for the U.S. producer’s gas assets in Mozambique, where energy companies are looking to tap the largest discoveries in a decade, according to people familiar with the situation.
Europe’s biggest oil company has begun informal talks with Anadarko about a deal for some or all of its 36.5 percent stake in the Rovuma-1 offshore gas fields, though Anadarko is reluctant to sell before further results of exploration in the area are known, the people said, asking not to be identified because the talks are private.
Anadarko hasn’t begun a formal auction process for the stake, which could fetch about $8 billion based on the price Thai energy company PTT Exploration & Production Pcl offered for the U.K.’s Cove Energy Plc, which holds 8.5 percent of the same fields, they said. Shell this week dropped a plan to buy Cove after its shares more than doubled in a bidding war with PTTEP.
“Big oil certainly see significant resource potential out of East Africa, with Mozambique today offering the largest prize,” said Theepan Jothilingan, an oil analyst at Nomura Holdings Inc. “It will be advantageous if you have one of them coming in on the development of the liquefied natural gas project and from that perspective Shell fits the bill. Anadarko will look to scale down at the right price.”
Officials at Shell and Anadarko declined to comment on any possible discussions.
Anadarko shares rose 81 cents, or 1.1 percent, to close at $72.63 in New York, while Shell’s London shares gained 0.6 percent to 2,216 pence.
Though Shell balked at Cove’s price, it may willing to pay a premium for Anadarko’s larger stake because it would give Shell the opportunity to take on the operatorship of the block from the U.S. company and lead the fields’ development, the people said.
Energy companies are racing to develop new production in East Africa, one of the world’s least-explored oil and gas regions, to meet rising demand from consumers in China, India, and other Asian countries. Apache Corp. will drill Kenya’s first-ever deepwater oil well next month, which could add a $70 billion oil find to gas discoveries elsewhere on the East African coast.
A Shell deal for Rovuma-1, where an Anadarko-led group has found natural gas equal to as much as six times the U.K.’s existing reserves, would bring the Anglo-Dutch company’s capital and expertise to bear on a complex energy project.
The partners in the fields, which include India’s Bharat Petroleum Corp. and Videocon Industries Ltd., will have to meet the cost of building a liquefied natural gas terminal to allow exports to Asia. Those companies’ stakes could also be attractive to Shell as it looks to build its position, one of the people said.
Mozambique will need $50 billion in investment over the next decade to develop its natural-gas industry, the mining minister said earlier this year.
The acquisition of Cove may be the first in a string of East African deals as exploration continues, drawing the interest of major energy companies like Total SA. Eni SpA, the largest Italian oil company, has also announced major gas finds off Mozambique, while in Tanzania the U.K.’s BG Group Plc and Norway’s Statoil ASA have made discoveries. The more than 100 trillion cubic feet of gas discovered so far off Tanzania and Mozambique could meet global demand for a year.