ONGC Videsh strikes $2.6 billion Mozambique deal

India's state-owned ONGC Videsh has become the latest Asian company to strike a deal in the resource-rich East African region.

ONGC Videsh, the subsidiary that handles the offshore operations for Oil & Natural Gas Corp (ONGC) on Monday agreed to buy a 10% stake in a Mozambique gas field from New York-listed Anadarko Petroleum Corp for a cash price of $2.64 billion.

Asian companies have been competing to secure equity stakes in liquified natural gas (LNG) fields  and, according to a person close to the situation, much of this will be sold into Asia, to offer a cheaper alternative to Australia's LNG. As a result, prices have been creeping up.

In June, Oil India and ONGC Videsh jointly agreed to buy a 10% stake in the same field for $2.47 billion from Videocon. Earlier this year, CNPC acquired Eni's block in an adjacent field for $4.2 billion. Last year, Thai company PTTEP bought  Cove Energy, which held an 8.5% stake in the Mozambique field for $1.79 billion.

"There has been a heck of activity from this field in Mozambique -- it has driven a lot of the M&A activity," said one person close to the situation. "We expect the chase for LNG to continue -- as Asian companies want to secure equity and diversify their sources of LNG geographically," the person added.

The deal is struck at an interesting time for India. The Indian rupee has been rapidly depreciating  and the government has been trying to rein in capital outflows. Earlier this month, it limited the foreign direct investments of Indian companies at 100% of their net worth, down from 400% previously. Companies that want to make foreign investments in excess of 100% of their net worth require approvals to do so.