State-run Bharat Petroleum Corporation (BPCL) has tied up a supply of 1 million tonnes (mt) of liquefied natural gas (LNG) from the upcoming $20-billion project in Mozambique, which is expected to commence operations in July.
BPCL subsidiary Bharat PetroResources (BRPL) through its Netherlands-based step-down subsidiary BPRL Ventures Mozambique holds a 10 per cent participating interest (PI) in the LNG project. BRPL along with ONGC Videsh (OVL) and Oil India (OIL) hold a total of 30 per cent stake in the project, which is led by Total Energies.
The project was halted in March 2021 after Total Energies declared force majeure following Islamic State-linked insurgents attacking civilians in Mozambique’s northern Cabo Delgado province where the natural gas project is coming up.
The work on the project is expected to start by July this year, BPCL management said in a results call on Tuesday. The project has a reserve of 64 trillion cubic feet (TCF) and has a capacity of 13 million tonnes per annum (mtpa).
The BPCL management said the project suffered a setback due to security issues resulting in force majeure. However, the security situation has substantially improved and it well positioned for restart in the near term. One important point to be noted is that despite the three-year force majeure period, all major contracts of Mozambique including LNG sales and project finance are going forward.
So far, the oil marketing company has invested roughly $900 million on the development side and another $729 million on exploration.
BPCL expects that force majeure to be lifted around July 2024. It is expected that the gas will begin to flow by FY28. The refiner has tied up 1 million tonnes of gas from the project. Overall, the consortium has tied up a total of 11 MT of gas with various entities.
The project assumes importance due to logistical convenience as Mozambique is close to India’s west coast (around 4,000 nautical miles), which has the maximum number of LNG terminals.
It is also high on the Indian government’s radar with Foreign Minister S Jaishankar visiting Mozambique in April 2023 followed by Oil Minister HS Puri’s stock taking visit to the project site in October of the same year. Besides, Oil Secretary Pankaj Jain also met with Total Energies CEO Patrick Pouyanne in May 2023 on resuming operations.
India imports around 20 mtpa of natural gas from different suppliers. Of this, around 8.5 MTPA is from Qatar through a long- term contract valid till April 2028.
BPCL CMD G Krishnakumar told analysts that crude oil prices have remained well below $90 per barrel in last three months, notwithstanding announcements of crude oil supply cuts by major suppliers. This resilience is attributed to lacklustre growth in many major world economies influencing downward revision in global oil demand projections.
However, the ongoing Russia-Ukraine war, conflict in the Middle East and tensions in the Red Sea all point to negative impact on the global supply chain. These continued uncertainties are anticipated to contribute to the volatility of crude oil prices throughout the year, he added.
The refiner expects crude oil prices to be range bound between $80-90 per barrel in the near term.
“Against the fiscal challenges faced by major economies, India continued to be an oasis of growth and stability. As the Indian economy experiences rapid expansion, the surge in energy demand becomes inevitable, prompting the continued reliance on fossil fuels at least for a couple of decades. So, the game will be on how responsibly we will be using fossil fuels, while at the same time balancing the newer green energy,” Krishnakumar emphasised.
The Hindu Business Line