Government-run Hindustan Petroleum Corporation (HPCL) is eyeing stakes in overseas oil blocks, primarily in Africa and Kazakhstan, as it looks to beef up its portfolio of producing and discovered assets.
The company plans to spend R3,000 crore mostly on building up its portfolio of developed assets over the next five years.
?We have a lot of exploratory assets at present, but we want a balanced portfolio,? K Murali, director (refineries), told FE. ?We?re mainly looking for participating stakes in blocks that are being developed or already producing.?
The company?s strategy to diversify its asset portfolio marks HPCL?s drive to inject new life into its upstream business after taking full ownership of its exploration and production (E&P) arm Prize Petroleum Company (PPCL).
PPCL, established in 1998 to prospect for and produce oil and gas in India and abroad, was merged into HPCL?s E&P division last year after the company bought out the shares of financial institutions HDFC Bank and ICICI Bank.
Exploration, or the process of searching for oil & gas, is costly and is remunerative only if a discovery is made. Investment in producing blocks, where oil is already being extracted, involves less risk. Therefore, HPCL, which mostly has participating stakes in exploratory assets, needs to balance its portfolio.
HPCL had a participating interests in 14 blocks in India and three overseas blocks as of March 31, according to the company?s annual report for 2011-12. Prize had two producing blocks and one exploratory block. The company is also in the process of selling its 8.4% stake in a deep-water block in Western Australia, Murali said.
Many new oil discoveries are being made in Africa, where 50 of the continent?s 55 countries are producing or exploring for oil. Huge gas reserves were found at a block in Mozambique earlier this year in which state-owned Bharat Petroleum Corporation (BPCL) and Videocon Industries hold stakes. US oil & gas company Anadarko Petroleum is the operator of the block with a 36.5% stake.
Oil blocks in Kenya, where several new discoveries are being made, and Kazakhstan represent attractive options for HPCL, Murali said.
Government-run ONGC Videsh last year acquired a 25% stake in Kazakhstan state oil firm KazMunaiGas to tap into the Central Asian country?s vast energy reserves.
US firms such as Apache and Anadarko, which operate oil-rich properties in Africa, may be attractive partners for HPCL.
?It?s not too late yet for HPCL to enter the E&P sector in an aggressive way, although peer BPCL has taken large strides in the same,? said a Chennai-based analyst who tracks the sector. ?It?s a good move to mitigate the risks involved in the refining and marketing business, but the issue here would be capital.?
Among public sector oil marketing companies, HPCL is relatively more geared, and flexibility in revenues from its various businesses is relatively low, he said. ?For instance, IOC (Indian Oil Corporation) has revenues coming in from pipelines, but in HPCL?s case, that contribution is low,? he added.
HPCL, which has been in talks with a number of international players, is looking for a partner with an excellent track record of developing assets, Murali said.
?We?re mainly looking to tie up with small to mid-sized technology-savvy companies rather than with big players,? he added.