ONGC's $2.4 billion Mozambique deal under Oil Min scanner

ONGC's $2.475 billion purchase of Videocon Group's 10% stake in a giant Mozambique gas field has come under the Oil Ministry's scanner following allegations that the PSU may have overpaid about $200 million, charges that the company vehemently denied.

ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had in June 2013 bought 10% stake in the Offshore Area 1 from Videocon Group for $2.475 billion. This stake was later divided between OVL and Oil India Ltd in 60:40 ratio.

The deal has now come under Oil Ministry's scanner following allegations that OVL might have overpaid Videocon.

Government officials said the ministry has over the past few months asked the company to provide several details of the deal including the basis of the valuation.

The inquest by the ministry was acknowledged by senior company officials, who said details have been provided on multiple occasions.

Sources said Videocon was in 2012 willing to sell its stake to OVL at a small premium to the price Thailand's PTT Exploration and Production paid for acquiring an 8.5% stake in the same block from

Cove Energy for 1.22 billion British pounds ($1.9 billion at exchange rate prevalent at that time).

The 10% stake, they said, was available to OVL for about $2.3 billion or so but the company a year later paid $2.475 billion to Videocon.

An e-mail sent to ONGC Chairman Dinesh K Sarraf, who was Managing Director of OVL at the time of the deal, for comments received a response from the company stating: "There is no basis to this allegation and ONGC Videsh strongly refutes it."

OVL had followed up the Videocon purchase by buying another 10% stake in the same Offshore Area 1 of Mozambique from US energy major Anadarko Corp for $2.64 billion in 2014.

A year later, Anadarko in its annual filings with the US Securities and Exchange Commission said it made a "gain" of $1.5 billion or over 62% of the purchase price, from the sale of 10% interest in Offshore Area 1.

Woodlands, Texas based energy exploration company Anadarko continues to be the operator of the block, with its stake reduced to 26.5% from 36.5% after the deal.

Presently, OVL has 16% stake in Offshore Area 1, which holds as much as 75 trillion cubic feet of gas reserves.

OIL has 4% and a unit of Bharat Petroleum Corp Ltd (BPCL) another 10% stake.

Other partners in Area 1 include Mitsui with 20% stake, ENH (15%) and PTTEP (8.5%).

Gas from the block is to be converted into liquefied natural gas (LNG) for transportation by ships to markets like India.