BPCL’s Mozambique Deal Comes Under Government Scanner

The government is looking into state-owned Bharat Petroleum Corporation Ltd.'s investments in a gas block in Mozambique and has not yet formally given its approval to the firm for further spendings, sources said.

Bharat PetroResources Ltd., an exploration and production subsidiary of BPCL, had in August 2008 bought a 10 percent stake in Area-1 Offshore of the Rovuma Block from the U.S. energy major Anadarko Petroleum Corp for $75 million. That same month Videocon through its subsidiary acquired a 10 percent stake in the same block for an equivalent block.

Sources privy to the development said Anadarko had originally offered a 20 percent stake in Area-1 to BPCL but the state-owned firm bought only half of it and the rest was picked up by Videocon. Videocon in 2013 sold the same stake to ONGC Videsh Ltd for $2.475 billion.

Sources said the government is looking into reasons why BPCL did not buy the entire 20 percent stake offered to it by Anadarko. Also, why it did not get other state-owned firms like ONGC involved if it wanted the exploration risk to be shared by splitting the 20 percent stake.

These inquests have led to the government not formally according approval to BPCL to invest a further $2.2-2.4 billion in the development of a giant gas field discovered in Area-1.

The proposal was reviewed by an informal ministerial panel headed by Home Minister Amit Shah in June this year.

The BJP-led NDA government since first coming to power in 2014 has 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 UPA regime, as falling oil and gas prices did not justify such huge investments.

Besides buying Videocon's 10 percent stake for $2.475 billion, ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, had bought another 10 percent stake from project operator Anadarko of U.S. for $2.64 billion.

It later gave 4 percent out of the stake bought from Videocon to Oil India Ltd.

Sources said even the OVL deal had in the first term of Modi government come under the scanner following allegations that the company might have overpaid Videocon.

Videocon was in 2012 willing to sell its stake to OVL at a small premium to the price Thailand's PTT Exploration and Production paid for acquiring an 8.5 percent stake in the same block from Cove Energy for 1.22 billion ($1.9 billion at the exchange rate prevalent at that time).

The 10 percent stake, they said, was available to OVL for about $2.3 billion or so but the company a year later paid $2.475 billion to Videocon. OVL had strongly refuted the allegations then and it isn't known what happened to that scrutiny.

Texas-based energy exploration company Anadarko, which was later acquired by Occidental, is the operator of the block. Other partners in Area 1 include Mitsui with 20 percent stake, ENH (15 percent) and PTTEP (8.5 percent). Gas from the block is to be converted into liquefied natural gas for transportation by ships to markets like India.