OREANDA-NEWS. April 28, 2012. Bharat Petroleum Corp’s (BPCL) 10% stake in the prolific Mozambique gas block has soared in value to almost Rs10,000 crore since Cove Energy put its 8.5% stake in the asset up for sale. The state-owned company has so far invested a paltry Rs483 crore in the asset.

The block, located in the Rovuma basin Area 1 concession in Mozambique, has reserves of 17-30 trillion cubic feet (tcf) and is expected to support two 5 million tonne per annum LNG terminals in future. Operating partner Anadarko Mozambique holds 36.5% participating interest in the block. The rest is split between Cove Energy, Videocon Mozambique, Mozambique’s national oil company, Mozambique subsidiary of BPCL’s exploration arm Bharat Petro Resources and two other smaller firms.

London-based and Africa-focussed Cove Energy put itself on sale on January 5 right after announcing probability of close to 30 tcf of gas in the Rovuma basin. Shell offered USD 1.6 billion, mainly for its 8.5% stake in the East African country. Later Thailand-based PTT Exploration and Production came up with a USD 1.78 billion counter bid which was later taken up to USD 1.8 billion by Shell on April 24.

BPCL, holds 360 million shares in the asset, could in fact see valuations go higher. “We ascribe a value of Rs273 per share for BPCL’s Mozambique block based on Shell’s USD 1.8 billion bid on Cove, which is Rs82 per share higher than our previous estimate of Rs191 per share,” analysts Gagan Dixit and Sapan Shah from brokerage Quant said in a recent report on the company. Dixit told DNA that Shell has estimated the Mozambique blocks at USD 21 billion, which gives the projects a value of over Rs9,800 crore for the BPCL stake. And once production starts, it is expected to add to a net profit of close to USD 2 billion, or Rs10,000 crore.

“But this would take some time to fructify as the first batch of supplies is expected to start from mid-2018 and reach a stable state within two years,” he said.

Another analyst with a domestic brokerage said the value of BPCL’s asset is expected to be even higher as the reserve potential is close to 25-30 tcf, which means it can produce close to 120 million metric standard cubic metres per day (mmscmd) of gas at peak, way above Reliance Industries’ reserves and production potential.

“BP has valued RIL’s KG D6 at close to USD 25 billion, much higher than the Mozambique block’s value but the latter is expected to produce more and also sell at imported LNG prices of USD 12-14 per mmBtu,” he said.