Amit Shah, Ministers Review Bharat Petroleum’s Mozambique Investment Plan 

An informal ministerial group that included Home Minister Amit Shah has reviewed state-run Bharat Petroleum Corporation Ltd.'s $2.2-2.4 billion investment proposal in a giant gas field in Mozambique. This comes as the government attempts a deeper scrutiny of overseas investments to avoid a fiasco again.

Sources said others in the group were Foreign Minister S Jaishankar, Commerce Minister Piyush Goyal, Oil Minister Dharmendra Pradhan and NITI Aayog Chief Executive Officer Amitabh Kant and the review was a prelude to the investment proposal going to the Cabinet Committee on Economic Affairs for formal approval.

Pradhan had in the past been critical of the nearly $6 billion spent by the Indian public sector firms to take 30 percent stake in the Rovuma Offshore Area-1 in Mozambique during the Congress-led United Progressive Alliance 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 $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.

About 75 trillion cubic feet of natural gas has been discovered in the field and the same will be converted in phases into liquefied natural gas for sale to overseas customers in ships.

In the first phase, $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 a 10 percent stake in the project and its share of investment comes to $2.4 billion. Of this $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 $703 million to buy the 10 percent stake in Rovuma Offshore Area-1 concession in the Cabo Delgado province in northern Mozambique.

ONGC Videsh Ltd., the overseas arm of ONGC, had in 2013 bought Videocon's 10 percent stake in the project for $2.475 billion and a similar stake from project operator Anadarko of the U.S. for $2.64 billion. It later gave 4 percent 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 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 U.S. 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 up to $7 billion in the project.

Anadarko Moambique Area 1, Lda, a subsidiary of Anadarko Petroleum, operates Offshore Area 1 with a 26.5 percent working interest. Co-venturers include ENH Rovuma Area Um, SA (15 percent), Mitsui E&P Mozambique Area1 Ltd. (20 percent) and PTTEP Mozambique Area 1 Ltd (8.5 percent).