Total commits $600 million to expand LNG presence in India

By Debjit Chakraborty and Stephen Stapczynski on 10/14/2019

(Bloomberg) - Total SA is spending $600 million to expand its presence in one of the world’s fastest growing natural gas markets.

Total agreed to purchase a 37.4% stake in India’s Adani Gas Ltd., a distributor of the fuel that is developing import terminals and a national chain of vehicle-filling outlets. The deal gives the world’s second-largest LNG player a footprint in a market where annual LNG demand will hit 28 million tons by 2023, making it the fourth biggest importer of the fuel, according to BloombergNEF.

Total is the latest energy major seeking to expand its presence in India, where population growth and economic development are luring some of the biggest oil and gas producers. In August, Reliance Industries Ltd. said Saudi Arabian Oil Co. may buy 20% of its oil-to-chemical business at an enterprise value of $75 billion.

“Energy needs in India are immense,” Total Chief Executive Officer Patrick Pouyanne said in a statement. “The natural gas market in India will have a strong growth and is an attractive outlet.”

The acquisition is the latest in a string of Total investments meant to beef up its presence in LNG. The French giant agreed to take over the Mozambique LNG project earlier this year as part of a deal for Anadarko Petroleum Corp.’s assets in Africa. The company has also recently absorbed Engie SA’s upstream assets, boosted its investment in Tellurian Inc. and its U.S.-based Driftwood LNG venture, and is planning to sanction a new gas export project in Papua New Guinea.

“Total’s investment in Adani is undoubtedly a show of faith in India’s gas demand growth,” Nicholas Browne, a Singapore-based analyst at Wood Mackenzie, said in an email. Gas demand will double to reach 75 billion cubic meters by 2030, equivalent to 7% of the country’s energy mix, with LNG meeting about 50% of this demand growth, according to the consultant.

Adani, whose shares jumped as much as 18% and headed for the highest close since July, is developing the Mundra and Dhamra LNG import terminals in India. It plans to expand its distribution network in the next decade to about 6 million homes and 1,500 retail outlets for natural gas vehicles.

Total said in a statement that the acquisition will cost about $600 million taking into account its divestment in another Indian LNG terminal earlier this year.

Total will make the purchase through a tender offer to public shareholders for up to 25.2% and the residual shares from Adani family, Adani Gas said in a statement to stock exchanges. Times of India reported in June that Total was close to buying a 30% stake in Adani for over $800 million.

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