HPCL eyes 30% equity in Egyptian E&P blocks

Sanjay Jog
Posted: Friday, Jul 04, 2008 at 2337 hrs IST
Updated: Friday, Jul 04, 2008 at 2337 hrs IST

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Mumbai, Jul 3: The state-run Hindustan petroleum Corporation (HPCL), which in consortium with exploration and production (E&P) partner companies currently has 19 E&P blocks in India and overseas blocks in Oman and Australia each, has shown its desire to secure 30% equity participation in Egyptian E&P blocks under Egypt-2008 Bid Round-I for exploration.

The bid has been floated by state oil company Ganoub El Wadi Holding Petroleum Company (Ganope) of Egypt for 12 exploration blocks in the Red Sea, South Gulf of Suez and East and West Desert Basins. Existing geology and geophysics data and a model production sharing agreement (PSA) will be provided by GANOPE on request and by payment of pre-determined total fees of $0.3 million for the 12 blocks. The bid closing date is July 15, 2008.

HPCL sources told FE the company has proposed an investment outlay of nearly Rs 11,500 crore during 11th plan, of which outlay on upstream is projected at Rs 2,000 crore. The company explores various options both in and outside India. As far as securing 30% equity participation in Egyptian E&P blocks, the HPCL board has already given its consent at its recent meeting. The board has asked the company to participate in the bidding process in a consortium.

HPCL’s participation in the Egyptian bid round will mandate certain preparatory steps to short-list blocks for bidding, including geotechnical studies of select assets and possible alliances with other Indian E&P companies.

Sources recalled that Gujarat State Petroleum Corporation (GSPC) had won two E&P blocks in Egypt with a 50% participating interest during the 2006 bid round. HPCL may weigh an option of forming a consortium with the GSPC to bid for suitable blocks in the present bidding round. However, sources said that both companies will have to agree to share pre-bid expenditure, execute a joint study and business agreement (GSBA) and prepare a joint bid for the short-listed concessions.

According to theGanope’s production sharing agreement (PSA), contractors will have to undertake all risk to explore and develop crude oil and gas. Ganope will bear and pay out of its share the royalty, and the contractor income tax in Egypt.

Ganope in its bid document said contractor may assign to a qualified contractor, in whole or in part, any of its rights, privileges, duties or obligations under the PSA either directly or indirectly with the prior written consent of the government, and in all cases priority will be given to Ganope. Further, the cost recovery and production sharing gas price will be agreed upon between contractor and Ganope after the commercial discovery and before converting an area to a development lease (s). Except gas for export (LNG) and pipelines where production sharing gas price will be valued at net back price.

GGanope has made it clear that during the exploration period an exploration advisory committee comprising equal number of representatives from contractor and Ganope will discuss and recommend the proposed work programme and budget. The contractor will have to give preference to the use of Egyptian goods and services subject to quality, availability and competitive pricing.