By the OGJ Online Staff
LONDON, Jan. 23 -- BG Group PLC unveiled a revised agreement Wednesday to buy all of Enron Oil & Gas India Ltd. (EOGIL) from Enron Corp., Houston, for a reduced price of $350 million.
BG Group originally said Oct. 3 that it would pay $388 million for EOGIL. However, officials said progress to close the transaction was slower than anticipated and further complicated by Enron's recent Chapter 11 filing for bankruptcy protection. As a result, the original sale agreement expired in December and was re-negotiated to take account of Enron's current position, officials said.
The revised agreement was reviewed by a committee of Enron creditors and is subject to a number of conditions including approval by the bankruptcy court. Enron is expected to file a motion shortly seeking court approval. Completion of the transaction is expected by mid-February
Frank Chapman, BG Group CEO, said, "This revised agreement secures strong producing fields at a price that is attractive to both BG Group's shareholders and Enron's creditors. These assets are important to the group's long-term strategy for India and will enable us to build a material gas position in the country."
Group officials are discussing operation of the assets with joint venture partners. In its original bid, BG Group insisted on becoming operator. But two of the partners, Oil and Natural Gas Corp. (ONGC) Ltd., and Reliance Industries Ltd., also expressed interest in taking over the operatorship.
Financial analysts suggest that BG Group will only extract the best financial results from the deal if it is allowed operatorship. However, Pravin Tandon, a spokesman for BG Group India, said, "The situation required us to move quickly on renegotiating the agreement. We thought it wasn't appropriate for operatorship to be attached as a condition under the circumstances.''
The assets owned by EOGIL are 30% interests in the Tapti gas field and the Panna-Mukta oil and gas field, and a 62.64% in the CB-OS/1 exploration license. All are located on the west coast of India and are operated by EOGIL
Partners in the Tapti and Panna-Mukta offshore operations are ONGC, which holds 40%; and Reliance, 30%.
Partners in the CB-OS/1 license are Hindustan Oil Exploration Co., 17.36%; Tata Petrodyne, 10%; and ONGC, 10%.
Other than the lower price and no longer being conditional on partner consent for EOGIL to continue as operator, the renegotiated agreement doesn't differ significantly from the October original.
India's imports of natural gas are expected to increase fivefold over the next decade to 7.7 bcfd after demand grew by 20% during the 1990s. India has proven gas reserves of 22.8 tcf, 15% less than the UK for a population 17 times its size.
BG Group's other assets in India include a 65% interest in Gujarat Gas Co., which supplies about 41 MMcfd in the western state of Gujarat. It also has a 50% interest in Mahanagar Gas Ltd., which operates a gas distribution network in Mumbai, India's commercial capital. BG Group plans to build a $400 million complex in Gujarat to import as much as 5 million tonnes a year of LNG.
