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Mozambique bidding war = gains for BPCL

Thursday, 24 May 2012 - 9:00am IST | Place: Mumbai | Agency: DNA
Asset value tops Rs12K crore; expected to rise further on counterbids.

State-owned Bharat Petroleum and private corporate major Videocon Industries are turning out to be big gainers in the bidding war between Thailand’s biggest oil explorer PTT Exploration and Production and British oil giant Shell Plc for the stake held by Cove Energy in the resource-rich prospective gas block in Mozambique.

Since January this year, both BPCL and Videocon have seen their combined asset size soar to over Rs 24,000 crore. The latest fillip came in the form of a counter bid by PTT of $1.92 billion on Wednesday for the stake, against Shell’s offer of $1.8 billion in April.

The promising gas block is located in the Rovuma basin Area 1  concession in Mozambique with reserves of between 50 trillion cubic feet (tcf) on the upper side and is expected to support two 5 million tonnes per annum (mtpa) LNG terminal in future.

London-based and Africa-focused Cove Energy put itself on sale on January 5 right after announcing probability of close to 30 tcf of gas in the Rovuma basin. That is when Shell offered $1.6 billion for it, which mainly comprises its 8.5% stake in the East African country.

Later, PTT came up with a $1.78 billion counterbid which was later exceeded by Shell’s $1.8 billion bid on April 24. On Wednesday, the valuations soared even further when PTT increased its bid to $1.92 billion.

The Rovuma basin is jointly held by a consortium of six players where BPCL’s Mozambique upstream subsidiary and Videocon Industries’s subsidiary hold 10% each. And 36.5% participating interest is held by Anadarko Mozambique, 20% by Mitsui E&P, 8.5% by Cove Energy and the remaining 15% is held by the national oil company of the country.

Analysts say the Thai oil-and-gas giant was motivated to pump in more money as on May 15.

Anadarko, which is the operator of the block, made yet another discovery in the basin, taking the total recoverable potential from the block to 50 tcf on the upper side.

“With the asset becoming more and more valuable going forward, it can be safely assumed that Shell would make yet another counterbid and this would mean further increase in valuations for BPCL and Videocon,” said an analyst with an international brokerage.

He said at Wednesday’s bidding price, the value of the asset has increased to almost $22.2 billion from $21 billion estimated after Shell’s last offer in April. This means, BPCL’s asset value is now more than Rs12,000 crore. Likewise for Videocon.

“We have ascribed a value of Rs306 per share as against our earlier estimate of Rs273 per share and this was higher than Rs191 from our previous estimate,” said Gagan Dixit from brokerage Quant.

He said considering the burgeoning demand of gas from the guzzling Asian markets, it is very likely that the valuation will increase further as Shell is not likely to leave the bidding race.

BPCL officials recently said the company will be investing close to $2 billion as part of its share to develop two 5 mtpa LNG terminals and part of the gas would be brought to India. The production from the fields is expected to start from 2018.




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