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Anadarko advances Mozambique LNG asset sale

07 Mar 2013 18:58:06 | glm

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Investment banks Standard Chartered and UBS have been hired to assist in the sale of a 20% stake in the offshore Rovuma Basin Block 1 permit in Mozambique, which is estimated to hold upwards of 65 trillion cubic feet (1,841 billion cubic metres) of natural gas underpinning the multi-train Mozambique LNG project.

The chairman of Indian telecommunications conglomerate Videocon, Venugopal Dhoot, told Indian television channel CNBC TV18 on Tuesday that the sale of its 10% share in the consortium is close to being finalised.

US-headquartered project leader Anadarko Petroleum has also confirmed it is seeking a buyer to reduce its stake in the offshore Block 1 - and associated stake in the LNG project - from 36.5% to 26.5%.

The combined 20% stake on offer has "attracted a lot of interest from industry", an Anadarko spokesman said on Tuesday, declining to disclose the specifics of the sales process. A Videocon representative was unavailable to comment on the details of its sale.

A bidding war for an 8.5% stake in the same project last July, which resulted in a $1.9bn sale to Thai state-owned oil and gas firm PTT, provides the market with a good benchmark for the valuation of the stake currently on sale, equity analysts told ICIS.

A 20% sale on that basis would settle for just under $4.5bn, but the project has evolved somewhat since PTT entered the project nine months ago.

More gas has been discovered, plans to develop shared onshore liquefaction facilities have been agreed, development costs are a bit firmer, and demand sentiment in Asia continues to move - and all these things have to be factored in, according to Investec analyst Brian Gallagher. And with the potential for yet more gas discoveries in the offshore block, "a line in the sand has to be drawn as to how much gas a buyer is actually buying", he added.

Gallagher continued: "[Nevertheless], the PTT valuation - plus or minus 10% - is still the best reference point. Anything else would be a shock and the economics for the project must have significantly changed."

Anadarko and Italian oil and gas company Eni agreed in principle in December to proceed with a unified liquefaction project, which will be fed from Block 1 and the Eni-operated offshore Block 4.

The project, whose final investment decision on the initial 20m tonne per annum phase is planned by the end of the year, in order to stay on track for a late-2018 start-up, could be interesting for a number of emerging market importers with big balance sheets and access to cash, according to Gallagher.

State-owned energy companies from China and India, such PetroChina and ONGC, could bid, analysts have said.

But with the Mozambique LNG consortium lacking previous LNG experience, international oil companies with experience of delivering LNG projects would be more favoured by the Mozambican government. As such, Anglo-Dutch oil and gas major Shell and US-based energy firm ExxonMobil are leading the pack as favourite candidates, according to analysts.

Whoever does buy into the Rovuma Basin Block 1 project, the transaction will be subject to a capital gains tax of 32% under the newly amended corporate tax regime in force in Mozambique since 1 January 2013. Prior to the sale to PTT last year, the country did not have a fiscal framework for such transactions, resulting in a negotiated capital gains tax on the PTT sale of 12%.

Aside from Anadarko, Videocon and PTT, the three remaining stakeholders in the Rovuma Block 1 are: Japanese trading house Mitsui, with 20%; Mozambique state oil company ENH, with 15%; and Indian state-owned refiner Bharat Petroleum, with 10%.

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