GAIL in talks for $600-m stake in Tanzania blocks

Written by Pranav Nambiar | New Delhi | Updated: Oct 24 2013, 14:49pm hrs
GAIL India is in talks to acquire between a 10% and 30% stake in five natural gas blocks in Tanzania held by UKs Ophir Energy with in-place reserves of over 40 trillion cubic feet (tcf).

Although the exact value of the deal is yet to be worked out, sources said bankers to the deal have estimated that the acquisition of a 10% stake in these acreages could entail an outgo of around $600 million for the gas distribution major.

A GAIL official confirmed the development, but refused to divulge further details as a deal has yet to be finalised. We are targeting East Africa and the US for more natural gas assets. East Africa offers us geographical advantage owing to its proximity with India, while the US shale boom has opened up various investment opportunities, the official added.

GAIL is on a drive to diversify into upstream activities, even as it is tapping into global liquefied natural gas assets to make up for the fall in domestic gas availability.

Ophir, which counts steel tycoon Lakshmi Mittal among its investors, has interests in five blocks with an area of 33,078 sq km in water depths up to 3,000 metres. As of March 4, 2013, Mittal Investments held a 4.51% stake in the company, the companys annual report mentions. In Tanzania, Ophir has a 40% interest in blocks 1, 3 & 4, an 80% operating interest in block 7 and a 70% operating interest in East Pande. Blocks 1, 3 and 4 are a joint venture with the BG Group, which holds 60% and operates the block.

Ophirs most prolific block is the offshore Block 1 where the Jodari find, along with surrounding satellite discoveries, is being used as the main base for setting up an LNG project in the Rovuma Basin.

GAIL has been aggressively acquiring assets overseas in order to secure LNG supply for the country as demand for natural gas is outstripping domestic production of gas. GAIL currently holds a participating interest in blocks in Myanmar as well as shale acreages in Eagle Ford, US. It has also unsuccessfully bid for Spanish oil company Repsols assets in Trinidad and Tobago in the past.

The falling domestic gas production volumes have resulted in GAILs gas transmission volumes falling to 105 million metric standard cubic metres per day (mmscmd) in FY13 and 99 mmscmd in the first quarter of FY14, from 118 mmscmd in FY12. GAILs transmission volumes will be augmented by increasing LNG imports as the capacity of Indias regasification facilities is likely to increase from 18.6 million tonnes per annum (mtpa) in FY13 to 41 mtpa by FY 16.

Apart from GAIL, upstream major ONGCs overseas arm ONGC Videsh (OVL) is also looking to make inroads into Tanzania. Oil ministry officials say that OVL will bid in the fourth licensing round for seven offshore and one onshore oil and gas blocks in Tanzania, starting October 25. OVL recently acquired a stake in the gas blocks of another East African country, Mozambique.