Friday, February 19, 2010

Approval for Investment in Gas Field Development Project of Blocks A-1 and A-3, Myanmar and Participation in Onshore Midstream Pipeline Company by ONGC Videsh Limited (OVL) and GAIL (India) Limited.
  

CCEA Decision



The Cabinet Committee on Economic Affairs today approved the following:



(i) ONGV Videsh Limited’s (OVL’s) additional investment up to an amount of USD 832.54 million including USD 664.7 million for its Participating Interest (PI) of 20% in Upstream Development Project with minimum IRR of 12.53% and USD 167.84 million for its share of 8.35% PI in Onshore Midstream Project (i.e. PIPECO-2) with minimum IRR of 15.5%. This will take total investment by OVL in the project up to USD 1006.39 million with the break-up of USD 115.77 million as Exploration cost till 31.10.2009, USD 564.06 million as Upstream development cost, USD 158.72 million as PIPECO-1 cost and USD 167.84 million as PIPECO-2 cost.

(ii) Authorising ONGC to provide financing/guarantee support for additional investment by OVL in the project to the extent of USD 832.54 million (i.e. USD 664.7 million plus USD 167.84 million).

(iii) Seeking exemption from Public Investment Board (PIB) route and also extending the ECS mechanism to GAIL, as available to OVL, for investments beyond the delegated power of GAIL’s Board for its share of investment as a one time measure for Myanmar Gas Development (up to 10% PI) and PIPECO-2 (4.1735% share) projects.

(iv) GAIL’s investments up to an amount of USD 502.06 million including the Upstream Development Project (USD 361.39 million) and past cost towards Exploration & Appraisal (USD 56.79 million) for 10% P.I. of GAIL and USD 83.88 million in onshore pipeline project (PIPECO-2) for 4.1735% share subject to the condition that GAIL will also ensure minimum IRR of 12.53% in Upstream Development Project and minimum IRR of 15.5% in PIPECO-2.



Expenditure Involved: Currently, the Blocks A-1 and A-3 are under Development Phase with effect from 1.11.2009. As on 31st October 2009, OVL and GAIL (India) Limited had made an investment of USD 115.77 million & USD 56.79 million respectively for exploration in Blocks A-1 and A-3. The entire project envisages an investment of USD 1006.39 million by OVL and USD 502.06 million by GAIL (India) Limited.

Benefits: The additional investment is expected to provide additional reserve accretion of hydrocarbons and facilitate production and marketing of Natural Gas from the Blocks A-1 and A-3 having participating interest of OVL and GAIL (India) Limited.

Background:

OVL and GAIL (India) Limited had acquired 20% and 10% participating interest in Block A-1 in January, 2002 and Block A-3 in March, 2006 from Daewoo International corporation (Daewoo) of Korea. The other Consortium members in the Block are Daewoo as operator with 60% PI and Korea Gas Corporation (KOGAS), Korea with 10% PI each. CCEA in its meeting held in October, 2009 considered the investment proposal of OVL, approved by Participation in the Upstream and Offshore Midstream sections of the Blocks A-1 and A-3, Myanmar Natural Gas Development Project by ONGC Videsh Limited and investments up to an aggregate amount of USD 173.85 Million in Blocks A-1 and A-3 by OVL.

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