CCEA nod for OVL's Egyptian acquisition

The government on Friday gave its nod to ONGC Videsh Ltd, the overseas arm of state-run Oil and Natural Gas Corp, to acquire Royal Dutch/Shell's 33 per cent stake in a deepsea gas field off Egypt.

The Cabinet Committee on Economic Affairs approved the proposal at a meeting in New Delhi on Friday, official sources said. OVL would pay 160 million dollars to Shell and bring the fuel in liquefied form (LNG) to India, they said.

Code-named 'Project Wonder', the North East Mediterranean Deepwater Concession in the Egypt Mediterranean Sea, has Shell as operator with 100 per cent stake. The gas field is estimated to hold close to 10 Trillion Cubic Feet reserves.

An OVL official said the company would not pay Shell for buying the stake but for its share of exploration cost in 2007 of 140 million dollar and a maximum of 40 million dollar for future cost beyond 2007.

Also, OVL would not pay toward the past costs (about USD 300 million) incurred by Shell till October 1, 2006. Besides, OVL will pay development bonus to Shell up to a maximum of USD 19.4 million at the time of award of lease by the local government and USD 35.343 million production bonus at the time of start of commercial production.

Shell has till now drilled five wells on the block and established presence of 1.9 tcf of in-place reserves. OVL estimates at least 9.62 tcf of reserves in the block, with an upside of 19 tcf, the official said.

Gas production from the discoveries is planned in 2012 with peak output of 330 million standard cubic feet per day. OVL plans to convert gas into LNG and bring it to India.