ONGC to Lend $857 Million to Unit for Myanmar Project

ONGC to Lend $857 Million to Unit for Myanmar Project
29-Dec-2009
http://www.bloomberg.com/apps/news?pid=20601207&sid=afm6mwUhUZBo
News, Gas
Dec. 29 (Bloomberg) -- Oil & Natural Gas Corp. will lend 40 billion rupees ($857 million) to its overseas unit investing in a gas project off Myanmar’s coast as India’s biggest explorer seeks to meet rising fuel demand at home. “For us it makes more sense to invest in assets through ONGC Videsh Ltd. than put the money in banks,”
ONGC Chairman and Managing Director R.S. Sharma said in a telephone interview today. The interest-free loan has no maturity date, Sharma said. ONGC, the New Delhi-based producer of almost 25 percent of the crude oil used by Asia’s third-largest energy consuming nation, is seeking to diversify its supplies and keep pace with India’s growing fuel needs. The company plans to get the equivalent of 60 million metric tons of oil, or more than double its output in India, from overseas fields by 2025. “There are limited number of opportunities at home,” said Apurva Shah, head of
research at Prabhudas Lilladher Pvt. in Mumbai. “Given that there is going to be some serious growth in domestic demand in the years to come, ONGC needs to get its hands on whatever assets it can get.”India is competing with China for energy assets worldwide as output from domestic fields declines. ONGC bought Imperial Energy Plc for 1.4 billion pounds ($2.2 billion) this year to gain access to oilfields in Russia.Chinese companies have announced plans to spend at least $16 billion on oil and gas fields in Africa.ONGC declined 1.3 percent to close at 1,181.55 rupees in Mumbai trading, compared with a 0.2 percent gain inthe benchmark Sensitive Index of the Bombay Stock Exchange. The stock has climbed 77 percent this year.
ONGC has a 17 percent stake in the Shwe, Shwe-Phu and Mya areas in the A-1 and A-3 blocks in Myanmar,estimated to hold between 4.5 trillion and 7.7 trillion cubic feet of natural gas.Daewoo International Corp. is the leader of the group that’s developing the fields and owns a 51 percent stake.Myanmar Oil & Gas Enterprise holds a 15 percent share, while GAIL India Ltd. and Korea Gas Corp. have 8.5
percent each.The group will supply 500 million cubic feet of gas a day from the fields to China National Petroleum Corp., Daewoo International said on Aug. 25. The venture plans to start deliveries in May 2013.
“ONGC Videsh will start repaying the loan when they start generating cash from the project,” Sharma said. The loan requires the approval of the Cabinet, he said. The group is in talks with China National Petroleum to build an 825-kilometer (513-mile) overland pipeline to transport the cleaner-burning fuel to the world’s fastestgrowing
major economy. ONGC has the “option” to buy a share in the pipeline, R.S. Butola, managing director of ONGC Videsh, said on Oct. 6. Daewoo International awarded a $1.4 billion contract to Hyundai Heavy Industries Co. to build an offshore production platform, offshore pipelines and a land terminal at the Myanmar fields by 2012, the South Korean company said on Nov. 2. Proven reserves in the country formerly known as Burma reached 17.5 trillion cubic feet at the end of last year, equivalent to a fifth of Australia’s reserves, according to the BP Statistical Review.