State-owned Oil and Natural Gas Corp and Oil India Ltd on Tuesday paid $2.475 billion to Videocon Group for acquiring 10% stake in a giant gas field off Mozambique.
ONGC Videsh Ltd (OVL), the overseas arm of state-run explorer Oil and Natural Gas Corp (ONGC), and Oil India (OIL) had jointly bought Videocon Group's 10% interest in the Rovuma Area-1 for $2.475 billion.
Additionally, OVL bought US energy major Anadarko Petroleum's 10% stake in the same block for $2.64 billion.
"The payments to Videocon were made today," said a source with direct knowledge of the development, adding that "payments to Anadarko will be made before February-end."
OVL raised about $1.5 billion in one-year bridge loans from foreign lenders to fund its part of the payment to Videocon while OIL raised $900 million in debt for its share.
The source said OVL will raise another $2.6 billion to fund the Anadarko payments.
Videocon, he said, was originally seeking over $2.8 billion for the 10% stake in the block that is estimated to hold a minimum of 35 trillion cubic feet (tcf) of gas reserves.
"Tough negotiations followed and we were able to bring down the price to $2.47 billion," he said.
A unit of Bharat Petroleum Corp Ltd (BPCL) already has a 10% stake in the block, which is estimated to hold a maximum of 65 tcf gas reserves, equivalent to 13 times the size of the currently producing fields in the KG-D6 block of Reliance Industries.
The resource accretion from this acquisition for 20% interest would be around 10 tcf, which is about one-fifth of India's present proven gas reserves.
"This acquisition will help us meet our energy needs as gas in the block will be turned into LNG for sale into markets like India," the source said.
The two transactions are to close by February 2014.
Area 1 covers approximately 2.6 million acres in the deep-water Rovuma Basin and the acquisition would mark the entry of OVL and OIL into the largest gas discovery in offshore East Africa.
The acquisitions reflect the recent aggressiveness of Indian firms in securing energy assets abroad.
Area 1 has the potential to become one of the world's largest LNG-producing hubs.
"It is also ideally suited to supply LNG to India at a competitive price due to its location," he said.