KOLKATA (miningweekly.com) - India’s oil and gas producer Oil India Limited (OIL) would raise $1-billion to fund the acquisition and subsequent development of a gas block in Mozambique, a deal that was concluded earlier this year.

According to company officials, the part acquisition of the Rovuma block, offshore of Mozambique, would be complete by the end of December, and the funds - to be raised through dollar-denominated bonds - would be used to fund the stake purchase and preliminary investments in exploratory work.

OIL, along with the overseas arm of domestic producer ONGC Limited, ONGC Videsh (OVL), had each acquired a 5% stake in the Rovuma Area I block in June 2013. The block was estimated to have about 65-trillion cubic feet of gas reserves, one of the highest discoveries in East Africa, the official said.

The OIL-ONGC stake was acquired from India’s Videcon Group, which has interests in consumer electronics, energy and telecoms.

OVL has also signed an agreement to acquire another 10% stake in the Rovuma asset from US-based Anadarko Petroleum Corporation.

Industry sources said that ONGC was also seeking to raise $1.5-billion to fund the development of the Rovuma blocks, but confirmation from the company was not forthcoming.

The $1-billion would be the first phase of foreign currency fundraising and plans were being drawn up for subsequent tranches for second-phase investments in OIL’s assets in Venezuela, the official said.

OIL has a minority 3.5% stake in Petrocarbobo SA, which was developing two blocks in the Ornico heavy oil belt in Venezuela.

The official said that currently production of a few hundred barrels of oil was coming from one well, but under an accelerated production programme, Petrocarbobo would achieve a production capacity of some 90 000 bbl/d by 2015, and this would require matching investments from OIL, in proportion to its equity holding stake in the asset.

OIL investment in Mozambique was crucial as it would not only mark its entry into overseas offshore gas assets but also assure imports of liquefied natural gas to India at substantially lower freight costs than current imports from the US, Canada and Russia, the official said.

According to India’s Ministry of Petroleum and Natural Gas, the Rovuma asset would be strategic once fully developed since it would yield the country an incremental ten-trillion cubic feet of gas reserves, in proportion to investments by Indian companies, and this would be equivalent to 20% of India’s domestic gas reserves.

The other partners in the consortium for development of Rovuma Area I were Anadarko, BNT-T, the national oil company of Mozambique, PTTEP, the national oil company of Thailand and India’s Bharat Petroleum Corporation Limited.