Indian consortium to bid for Cove Energy

A consortium consisting of India based Oil and Natural Gas Corporation (ONGC) and GAIL are preparing to place a bid for UK-based Cove Energy.

ONGC confirmed that it is currently participating in the formal sale process announced by Cove, but stated that no decision has been made by the consortium whether to make an offer for the company or the price at which any such offer may be made, reports the Guardian.

BDO corporate finance partner Chris Searle commented on the bids for Cove, "I’m not surprised that a bidding war has broken out for Cove, or that the latest bidders are Indian companies. It looks like the gas fields off Mozambique might contain 60tn cubic feet of natural gas.

"Put this together with their relative proximity to India and India’s increasing demand for natural gas and it’s not surprising that Indian companies should throw their hats in the ring. I also wouldn’t be surprised if Chinese companies entered the bidding war, the only certain winners of which will be Cove’s shareholders," Searle.

Cove Energy has already received an offer of 195p per share from Royal Dutch Shell while PTT Exploration of Thailand has offered 220p per share.

Shell is keen to gain access to Cove’s assets in Mozambique and Kenya, which have seen a significant increase in exploration activity in recent years.

The deal will increase potential for new LNG from recent gas discoveries off Mozambique and further complementary exploration positions in East Africa.

Cove Energy’s main asset is an 8.5% stake in the Rovuma River Basin located off the coast of Mozambique, which is estimated to contain 30 trillion cubic feet of gas.

US-based oil company Anadarko and two Indian companies, Bhasrat Petroleum and Videocon Industries are the other stakeholders in Rovuma River Basin.