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As India awaits the bidding outcome for a Mozambique block, it also marks a decade of oil production from blocks abroad. It was exactly 10 years ago, in March 2003, that ONGC Videsh Ltd (OVL) produced its first crude oil from the Greater Nile Oil Project (GNOP) in Sudan. Just two months earlier, it had started gas production from Block 06.1 in Vietnam.
In the intervening 10 years, the driving aim for state-owned OVL continues to be securing India's energy needs and at least match the Chinese pace of foreign acquisition, if not beat it. "The mandate for us is only one line-acquire assets overseas for energy security," said a senior executive. He, however, added that at the end, it has to be a commercial decision on whether and how much to bid for a particular asset.
Initial discussions on acquiring stake in four blocks in Nigeria from Sterling Energy and Exploration Production Company, an Indian privately-owned company, are also reportedly under way. Last year, OVL had bought 8.4 per cent stake in a major ConocoPhillips oilfield in Kazakhstan for $5 billion, in the largest natural resource deal ever for an Indian business.
As resource nationalism gains momentum in not just oil and gas, but also coal and other minerals, 14 Indian companies are present in 25 countries, with 84 exploration and production (E&P) assets. The approach of each company could, however, be different. "Privately-owned companies have narrower focus and are more selective in their choice of assets and geographies. PSUs are driven by the necessity to secure long-term resource supplies," said Mithun Varkey, India bureau chief, Mergermarket, an independent mergers and acquisitions (M&A) data and intelligence service provider.
Although private companies often have exits in their mind, farming in and farming out are part of the energy and resources business. Both private and public sector companies review their investments regularly and seek exits from non-strategic assets, said Varkey.
Videocon, for instance, is looking at exiting Mozambique's Rovuma-1 block that has huge gas reserves. The first round of bidding for Videocon's stake and another 10 per cent equity for Anadarko has been completed. "Videocon, that had paid just $75 million for buying into the field in 2008, has succeeded in getting a good valuation for the asset," explained the OVL executive.
The private sector player, present in diverse businesses such as power and fast-moving consumer goods in India, is looking to make four times its initial investment. What increased the value of its Mozambique assets were the recoverable gas reserves, estimated between 35 trillion cubic feet (tcf) and 65 tcf from the basin. To begin with, the consortium that has Bharat PetroResources Ltd, the exploration and production arm of Bharat Petroleum Corporation, Mitsui, Cove Energy and Mozambique ENH as partners, plans to sell 10 million tonnes of gas from two liquefaction trains.
Advantage China?
China National Petroleum Corporation has also picked up a major stake in one of the nearest blocks that the Indian companies are looking at, from ENI SPA. "For the stake sale by Videocon and US explorer Anadarko Petroleum Corporation, we have not heard anything officially from the Indian government. It would be great if Indian companies only invest in the block. But, at the same time, we look at the investment, and not the origin of it," Armando Inroga, minister for industry and trade, Mozambique, told Business Standard. "It is potentiality and technical expertise that matter."
China had a head start over India and penetrated deeper into markets like South America and Africa and even resource rich Canada and Australia.
India is still catching up and has had limited success in South America and parts of Africa. According to Varkey, the strategic intentions of public sector companies have forced some of the resource rich countries to adopt protectionist measures. "Even developed countries such as Canada have stepped in to stop large energy investments from government owned Asian companies."
OVL is now aiming to source 60 million tonnes of oil equivalent (mtoe) by 2030 from overseas E&P. This would include conventional, shale oil/gas, heavy oil and LNG. From a meagre oil and gas production of 0.253 mtoe in 2002-03, OVL registered a production of 8.753 mtoe in 2011-12.
