Besides buying a 12.5% stake in the pipeline that China is building in Myanmar, the Indian companies will also invest $1 billion in fields
The Indian government on Thursday permitted state-run Oil and Natural Gas Corp (ONGC) and GAIL to pick 12.5% stake in a pipeline that China is building in Myanmar, and allowed them to invest another $1 billion in fields that will provide gas to be shipped to China through the pipeline, reports PTI.
The Cabinet Committee on Economic Affairs (CCEA) headed by prime minister Manmohan Singh allowed ONGC Videsh Ltd, the overseas investment arm of ONGC, to invest $167.84 million in taking 8.35% stake in the pipeline.
GAIL will invest $83.88 million for taking 4.17% stake in the pipeline being constructed by China National Petroleum Corp (CNPC) to transport gas found in block A-1 and A-3 off the Myanmar coast, an official spokesperson said.
CNPC is building the $2.01-billion pipeline to ship gas from blocks A-1 and A-3, where OVL and GAIL India hold 17% and 8.5% stakes respectively, to China.
Gas from the blocks would be sold to China for $7.72 per million British thermal unit at the landfall point in Myanmar. The block is operated by South Korea's Daewoo which holds 51% stake.
Daewoo, OVL, GAIL and Korea Gas, which has 8.5% stake, are investing $2.79 billion in three gas fields in Block A-1 and A-3 off the Myanmar coast and another $936.26 million in laying a separate undersea pipeline to take the gas to the shore.
An official said that CNPC had offered 49.9% stake to the consortium developing gas fields in blocks A-1 and A-3. South Korea's Daewoo Corp holds 51% stake each in Block A-1 and A-3, while OVL has 17% stake.
GAIL and Korea Gas Corp have 8.5% each while the remaining 15% is with Myanmar's Myanma Oil and Gas Enterprise (MOGE). The consortium is investing $3.61 billion in bringing to production gas fields in the two blocks.
"The 49% stake is being apportioned in the same ratio as individual stakes in Block A-1 and A-3," the official said.
Daewoo too was inclined to participate in the 40-inch, 870-km pipeline and final shareholding in the pipeline project would be CNPC (50.9%), MOGE (7.37%), Daewoo (25.04%), OVL (8.35%), GAIL and KOGAS (4.17% each).
The official said that Shwe and Shwe Phyu gas fields in Block A-1 and Mya discovery in Block A-3 would be tied together to produce a plateau of 500 million standard cubic feet per day of gas for 19 years. The field life is envisaged for 28 years.
The first gas flow is anticipated in the first quarter of 2013.
Myanmar has decided that the gas from A-1 and A-3 would go to China. CNPC will pay $6.71 per mmBtu for the gas plus an offshore pipeline tariff of $1.02 per mmBtu.
The 30-year sale contract is indexed to US inflation, sources said. Sources said that the gas in A-1 and A-3 is lean (99% methane) with less impurities. Gas reserves of 4.532 trillion cubic feet in Blocks A-1 and A-3 have been certified.