 "S Varadarajan")
Bharat Petroleum Corporation Limited (BPCL), 54.93 per cent owned by the Government of India and until recently purely a fuel refiner and retailer, has diversified into exploration and production in a big way and now holds a stake in key blocks in Mozambique - where some of the world's biggest hydrocarbon reserves lie untapped.
This risk that BPCL took five-six years ago has been the key differentiator between itself and its peers - IndianOil Corporation (IOCL) and Hindustan Petroleum Corporation (HPCL). While BPCL's scrip has fallen 2.54 per cent on the Bombay Stock Exchange over the past year, those of HPCL and IOCL plunged by 20.64 per cent and 23.21 per cent.
BPCL's wholly-owned subsidiary Bharat Petro Resources Limited (BPRL) holds a 10 per cent stake in the 'Area 1' deepwater block in the Rovuma Basin in offshore Mozambique, which has recoverable reserves of 45 trillion cubic feet of gas. The stake that BPRL bought for a mere $75 million (Rs 330 crore in 2008) is valued at around Rs 12,390 crore today.
Such is the potential of the exploration and production blocks that "BPRL does not need BPCL's balance sheet to raise funds because, given the sheer size of discoveries across its assets, banks are willing to lend money to the company," said D Rajkumar, BPRL's managing director and chief executive officer.
BPCL has invested Rs 5,000 crore in BPRL, through which it carries out exploration and production activity internationally, half of it as equity. A Fortune 500 company, BPCL is the third largest refining company in India, with a total capacity of 30 million metric tonnes per annum (mmtpa), which it is expanding to 47.5 mmtpa.
Over the next five years, BPCL plans to invest Rs 40,000 crore - double what it invested in the past five years. Its key investments include: Rs 10,000 crore in exploration and production; Rs 7,000 crore in marketing; Rs 5,000 crore in gas infrastructure, Rs 15,000 crore in the Kochi refinery expansion; and a likely Rs 5,000 crore in the Kochi petrochemical project.
While an investment decision to develop the Mozambique block is likely in the coming months, the management expects meaningful reserve addition from the ongoing drilling in Brazil (Sergipe Alagoas Basin). BPCL plans to consolidate its current E&P investments and focus on new E&P acquisitions only after revenue generation from Brazil in 2017 and Mozambique in 2018, the company had said last September.
BPCL's debt-equity ratio was 1.42 in March 2013, against 1.54 a year earlier. Bank borrowing fell from Rs 20,749.94 crore in March 2012 to Rs 18,774.07 crore in March 2013. For IOCL, the largest of the three oil marketing companies, rising debt and deteriorating debt-equity ratios are a concern. IOCL's debt-equity ratio was 1.32 in March 2013, against 1.3 as on March 31, 2012.
Its borrowings rose to Rs 80,894 crore as on March 31, 2013, from Rs 75,447 crore as on March 31, 2012. HPCL's debt-equity ratio was 0.75 as of March 2013, against 0.66 in March 2012; over this period, borrowings rose from Rs 29,831 crore to Rs 33,789 crore.
"We are confident about full off-take of gas from the Mozambique block, and the consortium is in talks with players in Korea, Japan and China for gas sales agreements," said Rajkumar.
Analysts say that with the significant upside from its recently announced discoveries in the Sergipe Alagoas Basin and the Wahoo discovery in Brazil, BPCL also has a stake in 10 offshore blocks in Brazil, distributed across the Sergipe Alagoas Basin (four), the Espirito Santo Basin (three), the Potiguar Basin (two) and the Campos Basin (one).
So far, BPCL has made five discoveries in Brazil - one in Campos (operator Anadarko) and Espirito Santos (operator Petrobras) and three in Sergipe-Alagoas (operator Petrobras). Of these, only Anadarko has indicated the recoverable reserves estimate of 150-200 mmbbl for the Wahoo-1 discovery in the Campos Basin, and reserve estimates of Sergipe-Alagoas basin are not yet known.
In 2010, BPCL also acquired an interest in a block with shale gas potential in the Perth basin in Australia.
