In order to meet the requirements of its refineries, Bharat Petroleum (BPCL) plans to strengthen its liquified natural gas (LNG) portfolio by tying up additional long-term gas import contracts, acquiring more LNG terminals and setting up pipelines to enable smoother transport.
The state-owned refiner has chosen joint venture route to support its above-mentioned plans. "We are looking at international commitment as far as long-term gas import is concerned. In the next few months, we could tie up 1-2 mt long-term gas contract, which would then hit the market through these terminals and use pipeline network to reach customers," S Varadrajan, chairman and managing director, said in a press meet.
BPCL, an equity partner in Petronet LNG, is entitled for a 10% share of long term gas from Petronet's Dahej terminal. Petronet is currently expanding Dahej terminal from 10 mt to 15 mt, which has prompted the company to add 1 mt additional capacity at Dahej.
Besides this, the oil retailer also owns 40% share in Kochi LNG terminal. Currently this terminal's utilisation is very low due to absence of pipeline and market connectivity. Post the expansion of Kochi refinery (from 6mt to 15.5 mt), it will take substantial portion of gas from the Kochi terminal.
Currently, the company has a gas contract with Rasgas, which receives gas through Dahej terminal. Gas will be coming to Kochi terminal after 2017, which will take care of the gas requirement of the company's refinery and upcoming petrochemical capacity.
"We are looking at acquiring terminal capacities both at east and west coast. We are looking at a capacity 1-3 mt to satisfy our long-term demand," Varadrajan said.
On the upstream front, BPCL's overseas arm, Bharat PetroResources (BPRL), has acquired stakes in exploration blocks in Brazil, Mozambique, Australia, Indonesia and East Timor in consortium with global companies.
Mozambique and Brazil have been the company's key investment destinations so far.
Varadrajan said that the company has so far invested Rs 6,000-6,500 crore in upstream business, mainly in Mozambique and Brazil with the proportion being 40% in Mozambique and 45-60% Brazil.
In Mozambique, BPRL holds a 10% interest in the Area 1 offshore block where Anadarko Petroleum Corporation (USA) is the Operator. The block operator has estimated recoverable resources in the range of 50 to 70 trillion cubic feet of natural gas.
"In case of Mozambique for the first two trains of LNG, almost around 2/3 of the gas has been signed with major purchasers from Asia. Currently there are no purchases from India, there are conversation going on with Indian players also, but we need to see how pricing takes off," Varadarajan said.
On being asked about what was stalling the contracts with Indian players D Rajkumar, managing director and CEO, BPRL said, "We are seller of gas and are seeking best price. Japanese, Chinese and Thailand buyers are willing to pay better price."
Rajkumar hinted that the company was definitely looking at double digit price for gas but refused to quote exact figure. But indicated that the price could be 15-16% of Japanese crude cocktail (JCC). The consortium plans to put up two trains of a liquefied natural gas plant of 5 mt a year each initially, with the provision for future expansion. "In next 5-6 years, for first two train of Mozambique, we will be investing $1.6-$2.1 billion," Varadrajan.
As far as Brazil is concerned, BPCL would be investing $100-$120 million for resource determination, and the result of these appraisals will come next year. BPRL holds 40% stake in consortium along with Videocon (both holding 20% stake). Petrobras, Brazil's state-run oil company, owns 60% SEAL-11 offshore exploration block, which is likely to have a minimum 100,000 barrels of petroleum. First output from the block is expected in 2018.
Rajkumar said that Brazil block may start producing even before Mozambique as the later may require longer time for building up LNG terminals and other infrastructure. Mozambique has pure gas potential while Brazil has both oil and gas. Mozambique and Brazil are roughly being valued at $2.5 billion and $1.2 billion, Rajkumar said.
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