Bloomberg News

ONGC, GAIL Plan $2 Billion Bid for Cove, Times of India Says

February 28, 2012

Oil & Natural Gas Corp. (ONGC) and GAIL India Ltd. (GAIL) may offer $2 billion for Cove Energy Plc (COV), outbidding PTT Exploration & Production Pcl (PTTEP) and Royal Dutch Shell Plc (RDSA), the Times of India reported, citing unidentified people.

The state-owned Indian companies may submit a joint bid this week after getting approvals from the government, according to the newspaper report.

ONGC and GAIL India are considering bidding for London- based Cove Energy, two people with knowledge of the matter said Feb. 21. Cove owns a stake in a block off Mozambique, where there may be enough natural gas to supply China and India, Asia’s fastest-growing major economies.

“Considering the amount of reserves in the Mozambique block, I don’t think they would be overpaying,” said Harishchandra Sable, an analyst at Finquest Securities Pvt. in Mumbai. “In the long-term, it would be a positive for India and especially ONGC.”

ONGC climbed as much as 1.8 percent to 286 rupees, the biggest intraday gain since Feb. 22, and traded at 282 rupees as of 10:37 a.m. in Mumbai. The stock has risen 10 percent this year compared with a 14 percent increase in the benchmark Sensitive Index. GAIL, India’s biggest gas transmission company, rose 1.4 percent.

PTT Exploration, based in Bangkok, offered 1.1 billion pounds ($1.7 billion) for Cove on Feb. 24, two days after Shell’s $1.6 billion bid. Thailand’s only listed oil and gas company said yesterday it expects to face stiff competition from international rivals.

Cove holds 8.5 percent in a block off Mozambique where Anadarko Petroleum Corp. (APC) has found as much as 30 trillion cubic feet of gas. That would be enough to justify production of liquefied natural gas to supply Asian markets.

Standard Chartered Bank is advising Cove, which put itself up for sale last month. Cove said in a separate Feb. 24 statement the sale process for the company will continue and it reserves the right to reject any approach. The transaction depends on approval from the Mozambique government.

To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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