Mozambique to fuel BPCL’s gas plans

Bharat Petroleum Corporation Ltd (BPCL) is betting big on its overseas exploration business where Mozambique and Brazil, in particular, have been happy hunting grounds.

“We have had good discoveries in these countries and Mozambique has an opportunity to be the third largest LNG producing nation in the world. Needless to add, this is good news for us,” S Varadarajan, Chairman and Managing Director of BPCL, told Business Line .

Bharat PetroResources Ltd (BPRL), the exploratory arm of BPCL, has a 10 per cent stake in Mozambique’s Rovuma basin. The chief operator here is Anadarko of the US and the other equity partners include Mitsui and OVL-Oil India. Gas is expected to flow by the end of 2018-19 and this will mark an important chapter in BPCL’s energy business.

“Buyers could be from Japan, China, (South) Korea and India, which are natural markets for gas,” Varadarajan says. BPCL as a buyer is also in talks with the consortium to explore the possibility of bringing some gas from Mozambique here.

“If everything goes well, the gas could be brought by us to India though BPCL will take a decision purely based on pricing economics,” he says. Eventually, it is up to the consortium to take a call based on what it perceives is the best price on offer.

The upstream business has worked like a dream script for BPCL since the time it decided to take the plunge in 2003 and created BPRL. As Varadarajan says, there was a clear focus and strategy where the company earmarked a capital investment of $500 million (around ₹3,000 crore today) over five years. After all, it had its core business of refining and marketing to focus on back home in India.

The first step was to ensure good partners and this came in the form of Brazil’s Petrobras and Anadarko. “We also decided to focus on different geographies and not confine ourselves to just one. Fortunately, we took positions in Brazil, Mozambique, Indonesia, Australia, India and West Asia,” Varadarajan says.

The next important decision was to take just 10-20 per cent stakes rather than blow up big bucks in all these regions. Investments have also been focused on the early exploration stage rather than the more expensive end stage of development.

“This has been the core of our strategy where some luck played a role along with taking the right decisions, being in the right place at the right time and, finally, landing up with the right partner,” Varadarajan says.

North America has been in the news for a while now with its shale gas potential which could catapult the country into the big league over the next three years.

The BPCL chief believes North America is interesting from an investment perspective and there are a couple of opportunities which the company is looking at.

Whether the pricing in the US market will influence gas pricing in this part of the world remains to be seen.

As Varadarajan says, if the US is going to be a net exporter, it could change the dynamics of the energy market and the impact on oil/gas pricing will be interesting.

“Oil producers recognise these facts and the supply-demand positions will be something we need to wait and watch as we move along,” he adds. To that extent, BPCL is fortunate to have both Mozambique and Brazil in its kitty and will decide the quantum of investments going forward.

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