ONGC Videsh Ltd. and Oil India Ltd., Indian state oil companies, announced an agreement to purchase a 10 percent stake in a Mozambique gas field from Videocon Group for $2.48 billion, according to Reuters. The Mozambique Rovuma field is located in southern Africa.
"This is not only positive for these two companies but also for India in terms of finding new sources of energy," said K.K. Mital, chief executive of portfolio management services at Globe Capital Market. "Both the companies have a good amount of cash and it makes sense to deploy some of it in a gas-rich area."
ONGC will hold a 60 percent stake in the Mozambique Rovuma 1 block with Oil India holding the remainder through a newly formed entity, Reuters reported. The field holds the potential to be one of the world's largest liquefied natural gas producing hubs by 2018. It's also strategically located to supply India with gas at competitive prices.
Recent discoveries in the offshore field increased Mozambique's gas reserves to around 150 trillion cubic feet- enough reserves to supply Japan with LNG for 35 years, according to Reuters.