Shell makes $1.8bn offer for East Africa's Cove

Royal Dutch Shell has made an offer for Cove Energy, an oil and gas explorer with a focus on Mozambique, as the Anglo-Dutch major seeks access to East Africa's huge gas discoveries.

The move brings Shell closer to exports from the Horn of Africa, but it may still have to fend off competition from PTT Exploration and Production (PTTEP), the state-owned Thai energy company that made an offer for Cove in February.

Significant production also opens up the prospect of GCC imports from Africa, with the UAE touted as the most likely recipient of African gas.

Shell has tabled US$1.8 billion (Dh6.61bn) for the explorer listed in Britain, matching the PTTEP offer, and the oil major's marketing power and ability to deliver large-scale projects has made it the favourite to clinch the deal.

Cove's directors, who collectively hold about 4 per cent in the company, said they would be accepting the offer.

"Shell represents an excellent partner for all the stakeholders in the Rovuma LNG [liquefied natural gas] project, given its extensive project development, operating and marketing experience in the entire LNG value chain," Michael Blaha, Cove's executive chairman, said yesterday.

Rovuma is Cove's prime asset, an 8.5 per cent stake in an offshore concession that could hold more than 30 trillion cubic feet of gas.

The Thais have not ruled out returning with an improved bid.

"PTTEP is currently considering its options and will make a further announcement as and when appropriate," the Thai firm said yesterday.

Cove's share price traded above the 220 pence per share offered by Shell, indicating that investors were hopeful of a bid battle.

Energy companies have started eyeing East Africa with interest as oil and gas discoveries there are likely to make the region a supplier of hydrocarbons to the Asian growth markets.

"When planning, it's really the Asian market that Shell is casting an eye on," said Samuel Ciszuk, an analyst for KBC Energy Economics.

But the GCC, which is suffering from a severe shortage of natural gas, could also start importing African gas.

fneuhof@thenational.ae

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