BPCL's Mozambique block acquisition under scanner

New Delhi: The CBI will look into alleged irregularities in state-owned Bharat Petroleum Corp Ltd's (BPCL) investment in a gas block in Mozambique, the government's approval to the firm's further spending in the block has recorded, sources said. The approval to Bharat PetroResources Ltd (BPRL), the oil and gas exploration and production subsidiary of BPCL, investing its share of the $24 billion cost of developing the gas fields in the Rovuma Area-1 Offshore Block came with a noting that the CBI will continue to look into alleged irregularities, sources with direct knowledge of the development said.

BPRL had in August 2008 bought a 10 per cent stake in Area-1 Offshore of the Rovuma Block from the US energy major Anadarko Petroleum Corp for $75 million. That same month Videocon through its subsidiary acquired a 10 per cent stake in the same block for an equivalent sum.

Sources said Anadarko had originally offered a 20 per cent stake in Area-1 to BPCL but the state-owned firm bought only half of it and the rest was picked up by Videocon.

Videocon in 2013 sold the same stake to ONGC Videsh Ltd for $2.475 billion.

Sources said the government is looking into reasons why BPCL did not buy the entire 20 per cent stake offered to it by Anadarko. Also, why it did not get other state-owned firms like ONGC involved if it wanted the exploration risk to be shared by splitting the 20 per cent stake.

Around the same time, BPCL also chose the consumer durable company as a partner to buy Canadian firm EnCana's Brazilian oil block for $283 million.

The reasons behind BPCL tying up with a consumer durable company for highly specialised oil and gas exploration and production aren't known.

An email sent to BPCL for comments remained unanswered.

CBI had in June booked Videocon group chairman Venugopal Dhoot for alleged corruption in the financing of the Mozambique asset.

The agency registered the FIR after a preliminary inquiry on a complaint from the Oil Ministry.

The BJP-led NDA government since first coming to power in 2014 has been critical of the nearly $6 billion spent by the Indian public sector firms to take 30 per cent stake in the Rovuma Offshore Area-1 in Mozambique during the Congress-led UPA regime, as falling oil and gas prices did not justify such huge investments.

Besides buying Videocon's 10 per cent stake for $2.475 billion, ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), had bought another 10 per cent stake from project operator Anadarko of US for $2.64 billion.

It later gave 4 per cent out of the stake bought from Videocon to Oil India Ltd.

Sources said even the OVL deal had in the first term of the Modi government come under the scanner following allegations that the company might have overpaid Videocon.

Videocon was in 2012 willing to sell its stake to OVL at a small premium to the price Thailand's PTT Exploration and Production paid for acquiring 8.5 per cent stake in the same block from Cove Energy for 1.22 billion pound sterling ($1.9 billion at the exchange rate prevalent at that time).

The 10 per cent stake, they said, was available to OVL for about $2.3 billion or so but the company a year later paid $2.475 billion to Videocon.

OVL had strongly refuted the allegations then and it isn't known what happened to that scrutiny.

Woodlands, Texas-based energy exploration company Anadarko, which was later acquired by Occidental, is the operator of the block. Other partners in Area 1 include Mitsui with 20 per cent stake, ENH (15 per cent) and PTTEP (8.5 per cent).