Anglo-Dutch energy giant Shell has offered state-owned ONGC Videsh Ltd (OVL) 33% stake in an undersea acreage in Egypt with an estimated reserve of 15 tcf (trillion cubic feet) of gas, or approximately same as the certified size of Andhra offshore gas find made by Mukesh Ambani-controlled Reliance Industries Ltd.
ONGC Videsh has entered into a confidentiality clause with Shell and is awaiting government permission to proceed with the deal which will see Oil and Natural Gas Corporation's overseas investment arm spending as much as $380 million on appraisal and exploration of North East Mediterranean acreage, with a 20% escalation factor.
As per terms of the deal, OVL will not pay for a 33% share of the over $300 million of exploration cost borne by Shell till October 2006. It will carry Shell in the 2007 exploration plan up to $120 million and contribute a maximum of $40 million towards this end after the current year.
Once production starts around 2012, ONGC Videsh will pay a development bonus of $19 million and a production bonus of up to $35 million to Shell. Together, the two bonus components will, however, not exceed $55 million, based on a reserves-linked formula.
Malaysia's Petronas holds 16% in the acreage and has pre-emption rights. It can stall ONGC Videsh's entry by matching the deal within 30 days. It had tried to exercise this right during ONGC Videsh's 2003 buyout of Canadian Talisman Energy's 25% stake in prosperous Greater Nile Oil Project in Sudan. The Malaysian firm relented only after the intervention of the Sudan government.
The North East Mediterranean concession is a deepwater acreage in one of the most promising regions of the world for hydrocarbons.
It lies further offshore to other discoveries totalling 60 tcf of gas. It measures 41,500 sq km and was awarded to Shell in 1998. Shell relinquished 25% of the area after completing the first phase of exploration in March 2004 and is now left with 31,125 sq km.
Probable estimates for the prospects that are to be drilled in 2007 project availability of six tcf of gas. There is huge upside potential. No wonder, ONGC Videsh expects an internal rate of return not below 10% of its investment.
ONGC Videsh has entered into a confidentiality clause with Shell and is awaiting government permission to proceed with the deal which will see Oil and Natural Gas Corporation's overseas investment arm spending as much as $380 million on appraisal and exploration of North East Mediterranean acreage, with a 20% escalation factor.
As per terms of the deal, OVL will not pay for a 33% share of the over $300 million of exploration cost borne by Shell till October 2006. It will carry Shell in the 2007 exploration plan up to $120 million and contribute a maximum of $40 million towards this end after the current year.
Once production starts around 2012, ONGC Videsh will pay a development bonus of $19 million and a production bonus of up to $35 million to Shell. Together, the two bonus components will, however, not exceed $55 million, based on a reserves-linked formula.
Malaysia's Petronas holds 16% in the acreage and has pre-emption rights. It can stall ONGC Videsh's entry by matching the deal within 30 days. It had tried to exercise this right during ONGC Videsh's 2003 buyout of Canadian Talisman Energy's 25% stake in prosperous Greater Nile Oil Project in Sudan. The Malaysian firm relented only after the intervention of the Sudan government.
The North East Mediterranean concession is a deepwater acreage in one of the most promising regions of the world for hydrocarbons.
It lies further offshore to other discoveries totalling 60 tcf of gas. It measures 41,500 sq km and was awarded to Shell in 1998. Shell relinquished 25% of the area after completing the first phase of exploration in March 2004 and is now left with 31,125 sq km.
Probable estimates for the prospects that are to be drilled in 2007 project availability of six tcf of gas. There is huge upside potential. No wonder, ONGC Videsh expects an internal rate of return not below 10% of its investment.