After having witnessed promising results in its upstream assets of Mozambique and Brazil, the countrys second-biggest fuel retailer, Bharat Petroleum Corporation (BPCL), is now eyeing shale success in Australia.
The company, through its upstream subsidiary Bharat Petro Resources (BPRL) has a 27.803% stake in the hydrocarbon-bearing Western Australian region of onshore Perth touted to be one of the most prolific reserves of shale gas in the world.
According to the US Energy Information Administration (EIA), the shale gas basin is expected to hold reserves of 59 trillion cubic feet (tcf), which is close to 10 times the size of Reliance Industries Krishna Godavari (KG) basin block and almost equal to the gas reserves that BPCL has seen in Mozambique, where it has only 10% participating interest.
The shale gas block, EP413, is being operated by Australian-based Norwest Energy with 27.945% interest and the remining 44.252% is held by the subsidiaries of Australia Worldwide Exploration.
The 59 tcf reserves are an estimate of the EIA while the Norwest Energy feels it can even go up higher once the complete appraisal programme Arrowsmith-2 is over.
This estimate of 59 tcf does not include a contribution from the IRCM (another hydrocarbon formation within the EP413 block), which if proven commercial, could significantly increase this resource estimation, said Norwests last year annual report.
Its website said the exploration is divided into five stages, out of which the first one is complete. The last two stages will eventually inform on the actual shale gas bearing potential and is expected to be over in the next three months.
S Varadarajan, chairman and managing director, BPCL, did not return his calls after repeated attempts.
Even BPCL officials are gung-ho about it and seeing to turn their maiden shale gas foray into another upstream success story but said some concrete figures will come to the fore in 2014.
We have over 27% participating interest in a prospective shale gas asset in Australia and the initial results have been very encouraging. Further appraisal work is on and we are expecting results to come by 2014, said a top official in the company.
He did not wish to be named as he is not authorised to speak to the media on the subject.
If reserves are proven and found to be viable, BPRL could have claim to almost 20 tcf of natural gas reserves by virtue of their high participating interest, something it hasn't yet seen even in Mozambique where the company holds claim to around 10 tcf out of the total expected reserve base of 60 tcf, approximately.
In Mozambique, BPRL has a 10% participating interest in a consortium of 6 players including another Indian joint venture of ONGC Videsh-OIL.
An analyst with an international brokerage said: We are valuing BPCLs upstream asset at $1.7-1.8 billion, which is almost half of its market cap currently. This translates into a share price of close to R150-160 per share at a conservative estimate. With Indonesia and Australia coming in, this could revise significantly upwards.
However, he said the problem with shale gas is that it is highly capital intensive as it requires drilling of a very high number of wells so the amount BPCL shells out for its subsidiary in Australia will be way much higher than it is currently doing for Mozambique.
BPCL has so far invested R4,000 crore in its upstream business and will be investing another R12,000 crore till FY15, said RK Singh, former chairman and managing director, BPCL during the company annual general meeting in September.
The BPCL official said Australia will be a testing ground for BRPL and will help it in gaining experience which the company can then use to explore shale gas in India when the blocks come up for bidding next year.