Ruias-promoted Essar Oil has said that its exploration blocks in Vietnam and Madagascar have shown an initial indication of gas reserves of 2-3 trillion cubic feet (TCF) and around a billion barrels of oil, respectively.
Early this year, Essar Exploration and Production, a subsidiary of Essar Oil, bagged an offshore oil and gas block in Vietnam’s Song Hong basin and unveiled plans to invest $60 million to explore it. The block was offered to Essar by the Vietnam government under its seventh round of offshore licensing.
About 30 per cent of the gas is recoverable from the basins in Vietnam, while from Madagascar the company could recover 20-25 per cent of the reserves, said Deepak Mahurkar, associate director, PriceWaterhouseCoopers. "Now the company has to develop the basins after completing the surveys. The development time and cost are important factors for the company's future course of action," said Mahurkar.
Analysts said the gas finds of Essar could provide a major boost to its bottom line as Vietnam’s gas market is established. "However, the market for gas in Madagascar will not be as exciting as Vietnam as it is not an economically-advanced country. Also, the market will depend on the supply contracts they sign," said Kumar Manish, associate director, KPMG.
Essar Oil is also in the race to acquire two oil and gas blocks in Australia. The company has emerged as the preferred bidder to develop the blocks amid international competition. The Ruias will hold 100 per cent stake in the blocks.
Apart from the Vietnam block, Essar has seven oil and gas blocks – one each in Nigeria and Madagascar; and five in India. Essar Oil is consolidating its upstream exploration and production activities under Essar Exploration and Production.
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At present, Essar has only one oil-producing block in Mehsana (Gujarat). Last year, Essar produced 17,000 barrels of oil from this block.
Essar Oil CEO Naresh Nayyar had earlier told Business Standard, "We plan to take our refining capacity from 210,000 barrels per day (bpd) to 1 million bpd in the next three years. With the expansion at Vadinar, our capacity will go up to 700,000 bpd. The rest, we plan to achieve through acquisition of assets overseas."
The company plans to raise $9 billion, of which it will utilise $6 billion towards expansion of the Vadinar refinery. The remaining amount will be utilised towards funding its expansion in exploration and production activities across the globe. Last year, the company spent $75 million on exploration and production.