Over Seas Energy Assets

I S Rao, BPCL

Over Seas Energy Assets: Do Acquisitions of Foreign Energy Assets

Especially With Reference to Natural Gas

Translate to Greater Energy Security

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Energy Security

•Sufficiency in all forms of Energy

• Increase in Energy Efficiency

•Protecting the country from Supply risks

• Reducing dependence on Imports

“ Energy availability – in adequate quantity and affordable price– would be a

prerequisite to sustain targeted levels of economic growth and the desired levels

and spread of Social development”

GROWTH NEEDS ENERGY

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• Self Sufficient in all forms of Energy

• Increase in Energy Efficiency

•Protecting the country from Uneven Supplies

• Reducing dependence on Imports

“ Energy availability – in adequate quantity and good quality – would be a

prerequisite to sustain targeted levels of economic growth and the desired levels

and spread of Social development”

SOURCE: Planning Commission

Overall Energy Demand – India

Figs in MTOE

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DEMAND SUPPLY SCENARIO

Energy Consumption Trend: World & India

Source-Economic Survey 2011-2012

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Primary Energy Consumption : World

Source: Energy Outlook 2030,*derived

*2011 *2031

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Primary Energy Consumption : India

Source: *Gas In India, **Integrated Energy Policy Report

*2011 **2031

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Crude Oil NG Coal Primary Energy Consumption

Thousand Million Ton TCF Million Ton MTOE

India’s Reserves 0.8 43.8 60600 India 559.1

R/P Ratio (India) 18.2 26.9 103 World 12274.6

World Reserves 234.3 7360.9 860938 India as % of World 4.6%

R/P Ratio (World) 54.2 63.6 112

India’s Primary Energy production is short of meeting growing energy

demand to fuel GDP growth

Currently dependent on Large Volume of Imports

Primary Energy Reserves of India

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Ensuring Energy Security

• Increase the indigenous production.

NELP

Efforts to exploit the Coal Reserves

.

• Increased Efficiency resulting into Energy Conservation

Partnership based rural electrification programs

Building Energy efficient devices

In addition to the above initiatives, Sourcing the energy from Overseas is of

paramount importance to meet the demand the growing demand.

The Other options

Purchase at Prevalent Global Prices pre-supposes

Strong Forex Reserves

Positive BoP

Acquisition of E&P Assets abroad

A Balancing Act

Affordability

International Prices

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FACTORS INFLUENCING ACQUISITION OF ASSETS

DRIVERS KEY CONSIDERATIONS

Geo Political Proximity

Stability

Policy

Taxation

Regulations

Production Sharing Contracts

Government to Government understanding

Economic Cost of Assets

Ease of Monetization

Technological E&P is becoming more complex.

Availability of appropriate technology is

essential

Partnerships Taking Partners having proven competencies

& track records enables the sharing of

competencies & investments

Local Partners can reduce the political risk

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Securitize Energy requirements by E&P Acquisitions - Positives

Acquiring overseas energy assets to supplement domestic reserves assumes greater

significance in energy security policies & strategies of energy deficit and price

sensitive countries:

International E&P Assets offer natural hedge against volatile price levels

Sale of Equity Oil/ gas in these producing assets at prevalent international prices

& repatriation of profits to India hedges import costs

Alternatively depending upon PSC provisos, Equity Oil/ Gas can also be

repatriated to India for meeting domestic demand

Operatorship right in such assets helps in

Capacity building in E&P

Assimilation & Absorption of best technology to boost domestic E&P efforts

Boost Oil diplomacy

Development of local economy improves standard of living of locals and

enhances local participation in access to E&P acreage

Indian Oil & Gas majors can

Leverage financing risks in E&P investments & access international finance

Emerge as global energy players

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Financing Risk Creation of Sovereign Wealth Fund to assist NOC in

financing E&P Acquisitions Abroad

Having sound sale purchase contracts

Price Risk Study trends in international price of oil & gas & hedge-

bringing equity Oil/ Gas to India versus selling in

international markets

Timing of acquiring assets is crucial - purchases should be

made when prices are lower thereby allowing company to

profit from future high prices

Deep understanding & analysis of international oil market is

critical

Consortium Risk Commitment of consortium partners

M&A of PI of Operator or Major Consortium partner – Use

first right of refusal or exercise tag along rights

Consolidate E&P investments

E&P Acquisitions Abroad – Risks & Mitigation Strategies

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Indian Companies have made successful acquisitions abroad.

Indian Private Companies – RIL and Essar has also been active in acquiring blocks

Overseas.

Overseas Acquisitions by Indian Companies

OVL started with the exploration & development in Iran

In 2001, it acquired 20% stake in Sakhalin-1.

Major Investment by OVL - came with the acquisition of Imperial Energy Corporation

OVL also made investments in many other countries

BPCL created BPRL in 2006 so as to focus on the E&P activities. 25 oil & gas blocks

in India/ overseas. BPRL has blocks in Australia, Timor, Mozambique, Brazil.

Indian Oil portfolio includes eleven blocks spanning Libya, Iran, Gabon, Nigeria, Timor-

Leste, Yemen and Venezuela.

GAIL has assets in Myanmar and stake in Carrizo Shale acreage in U.S.

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Formation of E&P setup in BPCL

Formation

of BPRL

Brazil acquisition

Mozambique acquisition

2003

2006

2008

2010

First Mozambique discovery

Indonesia discovery

Entry into Shale Gas

Total of 8 discoveries

Joint operatorship in India

2004 – NELP IV

(3 blocks)

Entry into Australia and East

Timor

2009

2007

2011

Total of 14 discoveries -

monetization initiated

Case Study: Securitizing Future Energy Requirements - BPRL

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~ 1

25 Wells planned in 2012-13

12,500 Rs crs,

outlay till 2015-16 20 Partners

28 Blocks in advanced stages of

exploration, up from 3 in 2004

7 Countries in 15 geological

basins including coveted ones

10 Operators

14 Discoveries so far US Billion Dollars already invested

BPRL – A Snapshot

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Brazil Discoveries

BM-POT-16

Petrobras 60%

IBV Brasil 20 %

Petrogal 20%

BM-SEAL-11

Petrobras 60%

IBV Brasil 40%

BM-ES – 24 / 24A

Petrobras 40% / 70%

IBV Brasil 30 % / 30%

Anadarko 30% / 0%

BM-C-30 Anadarko 30% IBV Brasil 25 % BP 25% Maersk 20%

• Discovery of Hydrocarbons opened up a new frontier oil & gas

province in the Sergipe Alagoas Basin.

• 32-43 API Oil.

• Brazilian regulator (ANP) approved evaluation plan for Barra.

• 3 oil discoveries in 2012

• Discovery of Heavy Oil in the Espirito Santo Basin .

15 API Oil.

Consortium has submitted appraisal plan to ANP, the Brazilian

Regulator.

Barra, Farfan & Cumbe Discoveries

Grana Padano Discovery

• Discovery of Light Oil in the prolific Campos Basin.

31 API Oil.

Estimated Recoverable resources 200 MMBOE.

Brazilian regulator (ANP) approved evaluation plan.

• Potential First Oil expected in 2017.

Wahoo Discovery

* Bazil assets held through 50-50 JV with Videocon Ind

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Mozambique (Offshore Area 1)

Mozambique poised to become the third

largest LNG exporter after Australia and

Qatar.

Progressing on development of a 2

Train 5 MMTPA each LNG plant

Planning for LNG park of 10 trains

FID in 2013

First gas expected in 2018

Estimated recoverable resources : 35 to 65

Tcf of Natural Gas

An assured option for Gas supply to India

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Indian and Australian Discoveries

17

• Discovery of Light Oil in Cauvery Basin.

• 35 API Oil.

• Oil flowed during testing at 700 - 1000 bbl/day and

Gas flowed at approx 11500 Cum/day.

• Appraisal plan submitted to Ministry for approval

• Hydraulic stimulation of Shale Gas well in EP – 413

in Perth Basin in Australia.

• Five Zones fractured – HC encountered in all zones.

• Flowback in progress.

• Results encouraging, assessment in progress.

Madanam Discovery

Shale Gas

CY ONN 2002/2

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Exploration &

Production

Transportation

Pipelines/

LNG

Tankers

Liquefaction

Plants Shipping

Regasification

Terminal

CGD/

Industrial

Sales

Capital intensive, Gas Value Chain, has higher risks,

with Take or Pay, Ship or Pay and Use or Pay obligations

Participation across the value chain would ensure Security of supply

and price

NATURAL GAS BUSINESS HAS HIGHER RISKS

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USA

Shale Gas & Oil Play

Canada

Tar Sands

Conventional & Shale Gas

East Africa

Mozambique

Tanzania

Australia

CBM

Shale Gas

Slew of Opportunities emerging in E&P Acquisitions Abroad

Indian

Companies

evaluating the

opportunities for

securing its

energy needs

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Securing Natural Gas Supplies

•

•Demand and Supply Gap in India

All figs in MMT

•Ensuring Gas Security by participating across the LNG value chain

•Utmost important to secure Assets in Gas

To reduce risk across the Value Chain

Take advantage of Arbitrage Opportunities

Source : MoP, MoF, Report of the sub group on demand estimates for petroleum products &Infrastructure reports, Cedigaz,,CISStat,

GIIGNL, Poten, Wheatstone

Pipeline Trade

2010 (MMT)

Pipeline Trade

2011 (MMT)

LNG Trade 2010

(MMT)

LNG Trade

2011(MMT)

511 517 224 246

•Gas Trade and LNG trade is on rise

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Gas Infrastructure being developed in a big way

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Securing Gas Supplies therefore essential

• Securing Gas Supplies by tying up long term agreements

•Booking capacities in Pipeline and Regasification terminals

•Participation in the acquisition of Gas Assets and liquefaction terminals abroad.

“Energy Mix is going to change because of climate and efficiency

considerations. Gas as a form of energy would contribute significantly for

sustainable development”

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THANK YOU

Views expressed in this presentation are in personal capacity