An informal ministerial group that included Home Minister Amit Shah Tuesday reviewed state-run Bharat Petroleum Corp Ltd's USD 2.2-2.4 billion investment proposal in a giant gas field in Mozambique as the government attempted to do deeper scrutiny of overseas investments to avoid the fiasco of the past.
Sources said others in the group were Foreign Minister S Jaishankar, Commerce Minister Piyush Goyal, Oil Minister Dharmendra Pradhan and NITI Aayog CEO Amitabh Kant and the review was a prelude to the investment proposal going to the Cabinet Committee on Economic Affairs (CCEA) for formal approval.
Pradhan had in the past been critical of the nearly USD 6 billion spent by the Indian public sector firms to take 30 per cent stake in the Rovuma Offshore Area-1 in Mozambique during the Congress-led UPA regime, as falling oil and gas prices did not justify such huge investment.
He has also been critical of ONGC Videsh buying Imperial Energy of Russia after oil production lagged projections made at the time of USD 2.58 billion acquisition in 2008.
Sources said the government is vary of making the same mistakes and wants detailed scrutiny before any investment is approved.
Previously such decisions were vetted by ministerial grouping headed by the then Finance Minister Arun Jaitley. But with Jaitley out of the government because of health reasons, the task has now been taken over by Shah, who many believe is now the No.2 in the government after Prime Minister Narendra Modi.
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About 75 trillion cubic feet of natural gas has been discovered in the field and the same will be in phases converted into liquefied natural gas (LNG) for sale to overseas customers in ships.
In the first phase, USD 22-24 billion is to be spent by partners in Mozambique project to develop the field and build two LNG trains of 12.88 million tonnes.
BPCL holds 10 per cent stake in the project and its share of investment comes to USD 2.4 billion. Of this USD 800 million would be as equity - the single largest investment in an upstream project by the company ever. The remaining would be raised as debt.
Sources said this investment requires CCEA clearance and before that, the informal group vetted the plan.
BPCL Chairman and Managing Director D Rajkumar was also called at the review meeting.
The company board held an emergency meeting on Monday, possibly to approve the investment plan.
While Rajkumar did not answer multiple calls made to seek his comments, oil ministry was tight-lipped about the deliberations at the meeting.
BPCL had paid USD 703 million to buy the 10 per cent stake in Rovuma Offshore Area-1 concession in the Cabo Delgado province in northern Mozambique.
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had in 2013 bought Videocon's 10 per cent stake in the project for USD 2.475 billion and a similar stake from project operator Anadarko of US for USD 2.64 billion. It later gave 4 per cent out of this to Oil India Ltd.
Sources said the investment made commercial sense when gas prices were ruling in double digits but with their fall to USD 4-5, the project looked uneconomical.
However, all the three firms feel that the project is viable and they along with other partners in the project have sold as much as 9.5 million tonnes of LNG out of the initial production of 12.88 million tonnes. Two additional sale agreements are in the final stages of execution that, if executed, would bring the total volume to more than 11 million tonnes.
Last week, Anadarko Petroleum, the US independent energy group in the midst of a takeover battle, had stated that it was ready to make a final investment decision on the LNG project in Mozambique on June 18.
This might have triggered the emergency meeting of the BPCL board, they said adding OVL already has government approvals for investing upto USD 7 billion in the project.
Anadarko Moambique Area 1, Lda, a subsidiary of Anadarko Petroleum, operates Offshore Area 1 with a 26.5 per cent working interest. Co-venturers include ENH Rovuma Area Um, SA (15 per cent), Mitsui E&P Mozambique Area1 Ltd (20 per cent) and PTTEP Mozambique Area 1 Ltd (8.5 per cent).