Shell unit increases offer for Cove Energy

Royal Dutch Shell PLC announced plans for one of its subsidiaries to buy Cove Energy PLC for $1.81 billion in a transaction marking Shell’s entry into Mozambique and Kenya. Shell said the acquisition would provide major LNG project potential from recent gas discoveries offshore Mozambique.

Cove Energy’s board recommended its shareholders to accept the latest offer from Shell, which is 12% higher than an offer Shell made in February (OGJ Online, Feb. 22, 2012).

Shell faces competitors seeking to buy Cove Energy. The latest offer matched Thailand’s PTT Exploration & Production PCL’s offer made in February. India’s Oil & Natural Gas Corp. and Gail (India) Ltd. also reportedly were considering trying to acquire Cove Energy.

Finalization of the Cove Energy acquisition by Shell Exploration & Production BV, also known as Shell Bidco, remains subject to conditions, including written consent from Mozambique’s Minister of Mineral Resources.

"East Africa is a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years,” Shell said, noting it already has interests in Tanzania.

In Mozambique, the Rovuma offshore basin is a frontier area believes to hold large gas reserves suitable for LNG projects. Cove, which has offices in London and Dublin, holds 8.5% interest in the 2.6-million-acre Offshore Area 1 off Mozambique.

Anadarko Petroleum Corp. operates the Offshore Area 1 with a 36.5% interest, and Anadarko has estimated the deepwater Rovuma basin has at least 10 tcf of recoverable gas.

Shell said it’s willing to work with the Mozambique government, which wants to see the gas brought on stream to boost the country’s economy.

Shell joint ventures supplied more than 30% of worldwide LNG volumes during 2011. Shell produces LNG in Australia, Brunei, Malaysia, Nigeria, Oman, Russia, and Qatar.

Cove also has a 10% working interest in the Mozambique Rovuma onshore concession covering 12,000 sq km. The company plans seismic surveys this year to be followed by a 2-well drilling program next year.

Off Kenya, Cove has a 10% working interest in Blocks L5, L7, L11A, L11B, and L12. These assets cover 30,682 sq km. Cove plans to drill its first exploratory well off Kenya yet this year.

Contact Paula Dittrick at paulad@ogjonline.com.

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