The Financial Express: Mozambique Allows Cost Recovery for OVL’s Export-Oriented Gas Asset

In a positive development for ONGC Videsh Ltd, the Mozambique government has agreed to offer cost-recovery rights to production and development of its gas field and the LNG terminal in the African nation. Gas from the field is meant for exports and is expected to boost OVL’s revenue and bottom-line in the coming years.

Narendra K Verma, managing director of OVL told FE, “The Mozambique Parliament has recently approved a new law, which allows cost-recovery for both the oil field and the (LNG) terminal.”

ONGC Videsh Ltd, the overseas arm of government-owned ONGC, teamed up with another state-run player Oil India Ltd and bought Videocon’s 10% stake in Mozambique’s Rovuma Area 1 for $ 2.475 billion in June, 2013.

Subsequently,  in February, 2014, OVL on its own bought another 10% stake in the same field from Anadarko Petroleum Corp of the US for $2.64 billion. The 10% stake of Videocon purchased by OVL and OIL together is currently split in 6:4 ratio and total payout for OVL for the back-to-back acquisitions is $4.125 billion.

Verma said the gas sale negotiations were now being conducted with potential consumers. “OVL would start spending its share of $2-3 billion for the first two LNG evacuation trains starting next year (2016),” he said. The deliveries from Area 1 are expected in 2018. MORE