1. Over Seas Energy Assets:
Do Acquisitions of Foreign Energy Assets
Especially With Reference to Natural Gas
Translate to Greater Energy Security
I S Rao, BPCL

2. 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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3. Overall Energy Demand – India
• 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 Figs in MTOE |

4. Energy Consumption Trend: World & India
DEMAND SUPPLY SCENARIO
Source-Economic Survey 2011-2012 |

5. Primary Energy Consumption : World
*2011 *2031
|
Source: Energy Outlook 2030,*derived

6. Primary Energy Consumption : India
*2011 **2031
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Source: *Gas In India, **Integrated Energy Policy Report

7. Primary Energy Reserves of India
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
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8. 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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9. 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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10. 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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11. E&P Acquisitions Abroad – Risks & Mitigation Strategies
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
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12. Overseas Acquisitions by Indian Companies
Indian Companies have made successful acquisitions abroad.
Indian Private Companies – RIL and Essar has also been active in acquiring blocks
Overseas.
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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13. Case Study: Securitizing Future Energy Requirements - BPRL
Total of 14 discoveries -
Total of 8 discoveries monetization initiated
Joint operatorship in India
2010 2011
2009
2004 – NELP IV
(3 blocks)
2008
2007 Mozambique
acquisition
Brazil
2006 acquisition
Formation
First Mozambique discovery
of BPRL
2003
Indonesia discovery
Formation Entry into Shale Gas
of E&P
setup in Entry into Australia and East
BPCL Timor
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14. BPRL – A Snapshot
Blocks in advanced stages of
28 exploration, up from 3 in 2004 10 Operators
7 Countries in 15 geological
basins including coveted ones
25 Wells planned in 2012-13
20 Partners 12,500
Rs crs,
outlay till 2015-16
14 Discoveries so far ~1 US Billion Dollars already invested
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15. Brazil Discoveries
Barra, Farfan & Cumbe Discoveries
• Discovery of Hydrocarbons opened up a new frontier oil & gas
BM-POT-16 province in the Sergipe Alagoas Basin.
Petrobras 60%
• 32-43 API Oil.
IBV Brasil 20 %
Petrogal 20% • Brazilian regulator (ANP) approved evaluation plan for Barra.
• 3 oil discoveries in 2012
BM-SEAL-11 Grana Padano Discovery
Petrobras 60%
• Discovery of Heavy Oil in the Espirito Santo Basin .
IBV Brasil 40%
 15 API Oil.
 Consortium has submitted appraisal plan to ANP, the Brazilian
Regulator.
BM-ES – 24 / 24A
Petrobras 40% / 70%
IBV Brasil 30 % / 30% Wahoo Discovery
Anadarko 30% / 0%
• Discovery of Light Oil in the prolific Campos Basin.
 31 API Oil.
BM-C-30
Anadarko 30%  Estimated Recoverable resources 200 MMBOE.
IBV Brasil 25 %  Brazilian regulator (ANP) approved evaluation plan.
BP 25%
Maersk 20% • Potential First Oil expected in 2017.
* Bazil assets held through 50-50 JV with Videocon Ind |

16. Mozambique (Offshore Area 1)
An assured option for Gas supply to India
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
Mozambique poised to become the third
largest LNG exporter after Australia and
Qatar.
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17. Indian and Australian Discoveries
Madanam Discovery
• Discovery of Light Oil in Cauvery Basin.
• 35 API Oil.
• Oil flowed during testing at 700 - 1000 bbl/day and
CY ONN 2002/2 Gas flowed at approx 11500 Cum/day.
• Appraisal plan submitted to Ministry for approval
Shale Gas
• 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.
17
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18. NATURAL GAS BUSINESS HAS HIGHER RISKS
Capital intensive, Gas Value Chain, has higher risks,
with Take or Pay, Ship or Pay and Use or Pay obligations
Transportation
Exploration & Liquefaction Regasification Pipelines/ CGD/
Shipping Industrial
Production Plants Terminal LNG
Tankers Sales
Participation across the value chain would ensure Security of supply
and price
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19. Slew of Opportunities emerging in E&P Acquisitions Abroad
 USA
 Shale Gas & Oil Play
 Canada
 Tar Sands
 Conventional & Shale Gas
 East Africa
Indian
 Mozambique Companies
evaluating the
 Tanzania opportunities for
securing its
 Australia energy needs
 CBM
 Shale Gas
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20. Securing Natural Gas Supplies
•
•Demand and Supply Gap in India
•Gas Trade and LNG trade is on rise
Pipeline Trade Pipeline Trade LNG Trade 2010 LNG Trade
2010 (MMT) 2011 (MMT) (MMT) 2011(MMT)
511 517 224
All figs in MMT 246
•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

21. Gas Infrastructure being developed in a big way
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22. 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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23. THANK YOU
Views expressed in this presentation are in personal capacity |