The reason: Bright prospects in Mozambique, where the exploration arm of Bharat Petroleum Corp. Ltd (BPCL), ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) hold a majority stake in the Rovuma Area 1 basin. After completing the exploration programme, the field’s operator Anadarko Petroleum Corp. has pegged the final recoverable natural gas resource in the area at 75 trillion cubic feet (tcf).
The 30% share in the field jointly held by the three firms entitles them to more than 22 tcf of reserves. This translates to nearly three times the reserves at India’s biggest gas field in offshore Bassein operated by the Oil and Natural Gas Corp. Ltd (ONGC) that holds close to 8 tcf; or 16 times the reserves at the D6 block of Reliance Industries Ltd in the Krishna-Godavari basin in the eastern offshore of India.
Anadarko disclosed the new estimates to analysts in a conference call on 3 March, detailing its guidance for the next fiscal year. The transcript of the call was available on Bloomberg on 4 March.
The new guidance is a marked shift from the earlier range of 50-70 tcf projected by Anadarko and gives greater clarity on the available resource in the region.
BPCL’s upstream subsidiary Bharat PetroResources Ltd (BPRL); OVL, which is the overseas exploration arm of state-owned ONGC; and OIL together hold the majority stake in Mozambique at 30%.
Individually, BPRL holds 10%, OVL has 16% and OIL holds 4%. Anadarko holds 26.5%, while the balance is held by a clutch of exploration companies such as Mitsui and Co. Ltd with a 20% stake, Empresa Nacional de Hidrocarbonetos EP at 15% and Thailand’s PTT Exploration and Production Plc at 8.5%.
A BPCL executive, on condition of anonymity, said this is the first time Anadarko has pegged a single resource figure, rather than announcing a range of recoverable reserves. This is because the exploration work is now over.
“This is, of course, a shift from earlier estimate, but it is still the gross recoverable reserve. It can be categorized as reserve only when the certification is done by the government," he said, adding since the exploration programme is over, the current figure is not expected to vary much from the final figure.
The deepwater Rovuma Basin, Offshore Area 1, is spread over approximately 2.6 million acres in northern Mozambique. The exploration activities in the area have so far resulted in six of the world’s largest discoveries in 2010, 2011 and 2012. These natural gas accumulations are located in water depths of approximately 5,000 feet, according to Anadarko’s website.
“Mozambique is a phenomenal value-creation opportunity that will create a world-class competitive global LNG (liquefied natural gas) supply source, with over 1 million acres, we have discovered 75 tcf of gross recoverable resources and have proposed to build an initial development of two LNG trains at 10 million tonnes per annum, and make the facility scalable to over 50 million tonnes per annum. Several factors give this project cost advantage against other developments," said James J. Kleckner, executive vice-president (international and deepwater operations) at Anadarko, in the conference call.
He said the company is closely working with its partners and the government to ship the first batch of LNG by 2019.
The Anadarko management also said the partners have already signed offtake agreements with various customers for 8 million tonnes of LNG after it is ready.
The BPCL executive quoted earlier confirmed that the offshore facilities to extract gas and build the onshore terminal will cost about $15 billion, out of which $10 billion will be debt and the remaining equity. Indian companies will have to chip in with $4.5 billion as their share of the total cost till 2019.
During an earlier interaction with analysts in February, the Anadarko management had indicated that the cost of setting up the LNG terminal might come down substantially as prices of most commodities required to set up the terminal are currently low.
However, the BPCL executive said the final investment figure will take some time to freeze.
The BPCL stock, which is the best performing among India’s oil marketing companies, rules at a premium especially due to its investments in its upstream venture in Mozambique and Brazil.
“Although BPCL’s shares are at a premium than its peers, of late, the premium has come down due to falling crude oil prices, which has reduced the price of LNG," said Gagan Dixit, an analyst with brokerage firm Quant Capital Ltd.
Dixit explained that globally, in December, investments in LNG terminals on an average were breaking-even at an LNG price of $12.5 per million British thermal units (mmBtu), but now the price has come down to $8.5 per mmBtu. This has brought down the upstream share in BPCL’s stock price to ₹ 160 per share in February from ₹ 250 per share in December, he said.
On 5 March, BPCL’s shares on BSE closed at ₹ 775.30 apiece, up 0.70%, while ONGC closed at ₹ 319.80 per share, down 0.17% and OIL rose 1.10% to ₹ 493.70 per share. The exchange’s benchmark Sensex rose 0.23% to close at 29,448.95 points.