BPCL to invest Rs13,000 crore in Mozambique, Brazil upstream business

Mumbai: Bharat Petroleum Corp. Ltd (BPCL) plans to invest Rs.13,000 crore in energy exploration and production in Mozambique and Brazil over the next four years-its biggest investment in the so-called upstream sector.

The planned investment is twice the amount the company has spent in exploration and production activity in the last 10 years and is part of the total capital expenditure of Rs.35,000 crore it has chalked out for the next four years.

The investment has been planned keeping in mind the target of commencing production from the Mozambique and Brazil assets by fiscal 2019, said S. Varadarajan, chairman and managing director of BPCL, in an interview on the sidelines of a press briefing held late Thursday in Mumbai.

Production from BPCL's Brazilian blocks, which hold primarily crude oil reserves, is expected to begin in fiscal 2018. Exports of liquefied natural gas (LNG) from the Mozambique blocks, which largely hold natural gas, will start from fiscal 2019.

BPCL, through its wholly owned subsidiary Bharat PetroResources Ltd (BPRL), owns oil and gas assets in Brazil, Mozambique, Indonesia and Australia.

"These two assets (in Brazil and Mozambique) are where the major chunk of investments are planned in the coming few years," said D. Rajkumar, managing director and chief executive officer (CEO) of BPRL.

BPRL owns a 20% stake in the Brazil blocks via an equal joint venture with Videocon Industries Ltd. Petrobras SA, the national oil company of Brazil, is the operator of the block and holds the remaining 60%. In Mozambique, BPCL holds a 10% stake in a gas block that is operated by US-based Anadarko Petroleum Corp.

Analysts expect the assets in Mozambique to help BPCL reshape itself into an integrated oil and gas company once they become operational.

BPCL has so far not released an estimate on reserves in the Brazil block.

"After the appraisal (study) of the Segipe-Alagoas basin is completed in Brazil, the final investment figure will be known but we estimate (it) at around Rs.3,000 crore approximately," Rajkumar said, adding that lately the company has seen major reserves of natural gas in the basin as well.

The appraisal results on crude oil will be known by August 2015 and those on natural gas a year later, analysts Swarnendu Bhushan and Durgesh Poyekar at brokerage Elara Securities (India) Pvt. Ltd wrote in a report released on 5 September.

"The Sergipe-Alagoas Basin off Brazil has proven the presence of light oil and gas in two discoveries.The rest of the appraisal includes drilling two wells and one contingent well in each of the discoveries," they wrote

Meanwhile, the natural gas reserves in the Mozambique block have been ascertained at 50-70 trillion cubic feet (tcf) by its operator Anadarko, which is almost 10 times the reserves of Reliance Industries Ltd's D6 block in the Krishna-Godavari basin.

BPCL's share of reserves is at 5-7 tcf, equivalent to the size of the D6 block in India.

Rajkumar said BPRL will be investing up to Rs.10,000 crore as part of its share towards a 10 million tonne per annum (mtpa) LNG terminal project at Mozambique. Off-take agreements for two-thirds output have already been signed with Asian companies, he added.

The promising exploration and production assets in Mozambique and Brazil put BPCL on a better footing compared with its peers such as Indian Oil Corp. Ltd (IOCL) and Hindustan Petroleum Corp. Ltd (HPCL), Ashish Jagnani, an analyst with UBS Investment Research, wrote in an 8 September report.

On Friday, BPCL shares closed at Rs.656.15 per share on the BSE, down 0.94%. The S&P BSE Sensex fell 0.08% to close at 27,090.42 points.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.