The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Kevin Allison
LONDON, Feb 29 (Reuters Breakingviews) - Few energy
companies look better-positioned than Shell to make
Cove Energy into a money-spinner. If only it were so
simple. It took just two days for Thailand's PTT to top the oil
major's $1.6 billion all-cash offer for the Africa-focused
explorer with its own $1.8 billion bid. Now potential Indian
bidders are circling. The prize is an 8.5 percent stake of a
large block in the Rovuma basin off the coast of Mozambique.
Shell could probably justify paying a bit more, but it needn't
get dragged into a bidding war. There are alternatives.
Shell isn't being stingy. Last week's offer was pitched at a
70 percent premium to Cove's share price before it put itself up
for sale in January. But for state-owned Asian rivals, energy
strategy may trump price. Asia is short of gas, and the field's
position off the Eastern coast of Africa makes it an ideal base
for exports to Indian Ocean ports. Cove's stake in Rovuma
Offshore Area 1, thought to contain up to 30 trillion cubic feet
of gas, would secure some long-term supply.
Shell might be tempted to pay a bit more to clinch a deal,
particularly if it came with pre-emption rights over subsequent
sales in the block. But even if Cove goes elsewhere, Shell has
some advantages for future bids. The Mozambique government,
which has to approve any deal, will be mindful that Shell has
the highest concentration on gas of the oil majors, with
extensive experience delivering big LNG projects.
Existing shareholders in Rovuma lack the wherewithal to
develop the field themselves. Anadarko, the block's 36 percent
owner-operator, is a savvy explorer but relatively inexperienced
in LNG. It seems likely to reduce its stake once the project
enters a more intensive development phase. Smaller shareholders
such as Videocon, the Indian conglomerate (10 percent), may also
be persuaded to sell. So might Italy's Eni, 70 percent
owner of an adjacent patch of seabed thought to contain equally
huge amounts of gas.
Shell may covet Cove, but it shouldn't be afraid to let its
quarry go if the bidding gets out of hand.
-- India's ONGC and GAIL this week became the latest energy
groups to say they are considering an offer for Cove Energy, an
Africa-focused oil and gas explorer. The state-owned gas
companies have yet to decide whether they will make an offer,
according to a regulatory filing published on Feb. 28.
-- The filing came after the Times of India reported that
the state-owned energy groups were planning offer $2 billion for
Cove, whose main asset is an 8.5 percent stake in a giant gas
field off the coast of Mozambique.
-- Speculation about an Indian bid comes less than a week
after the exploration arm of PTT, a Thai state-owned oil group,
offered $1.8 billion for Cove, topping an earlier $1.6 billion
offer from Royal Dutch Shell, the Anglo-Dutch oil major.
-- The Rovuma Offshore Area 1 block is thought to contain up
to 30 trillion cubic feet of natural gas. Cove also owns
minority stakes in other exploratory fields in Mozambique,
Tanzania and Kenya.
-- Reuters: Indian group may trump Shell's gas bid for Cove
-- For previous columns by the author, Reuters customers can
(Editing by Edward Hadas and David Evans)