MUMBAI: Prize Petroleum Company Ltd (PPCL), the exploration and production (E&P) arm of Hindustan Petroleum Corporation Ltd (HPCL) and which merged with the latter last year, has begun the transfer of assets and is to soon have a business plan in place.
Last year, the company was merged with HPCL’s internal E&P arm, HP E&P. “We are in the process of consolidating the business under the new entity. We have to have approval from the HPCL board and then submit the same to the managing committee and then the Directorate General of Hydrocarbons. Transfer of assets and consolidation is important as of now,” a senior HPCL official said.
Prize Petroleum has also put on hold its plans to buy assets abroad till the process of consolisation is completed. “We were in talks with a company to acquire an oil and gas block in Africa but we have other priorities right now,” he added.
It was in talks with a local company in Africa for a discovered asset, so that it could have ready cash flow in one or two years. HPCL’s move is part of the overall attempt by oil marketing companies to venture into the more lucrative oil and gas producing business. Acquisition of discovered fields helps reduce risks with the business to some extent.
The company would also be spreading its investments into conventional and non-conventional segments and look at partnering with successful operators in oil and gas, coal-bed methane and shale gas abroad.
HPCL officials said it ventured into the upstream sector without much experience. It created a very high-risk portfolio without knowing much about the business. Prize Petroleum was set up in 1998 as a joint venture but did not meet with much success.
The company had earlier said though it had 20 blocks in India, it mostly encountered dry wells in the Kerala-Konkan basin, Rajasthan (two blocks), Mumbai High (two blocks) and the Assam block, now being relinquished by both Oil India Ltd (IOC) and HPCL.
HPCL’s decision to merge Prize Petroleum with itself was part of a move to change its E&P strategy and emulate its peers, Indian Oil Corporation (IOC) and BPCL, which, despite being late entrants in this sector, are performing well. The company said there had been many setbacks but it had now decided be systematic about the E&P business.
Through HP E&P, it had forayed into the upstream sector to gain access to equity oil and ensure energy security. HPCL, in consortium with other E&P partner companies, currently has 19 blocks in India, one in Australia and two in Egypt.
Last May, HPCL made Prize Petroleum its wholly-owned subsidiary by buying shares held by ICICI Bank, ICICI Venture and HDFC. Before that, HPCL held 50 per cent stake in Prize. It is now strengthening the company by recruiting senior geologists and geophysicists.
IOC, the biggest oil marketing company in India, has a domestic portfolio which includes 11 oil and gas blocks and two coal-bed methane blocks. Its portfolio abroad consists of 11 blocks spanning Libya, Iran, Gabon, Nigeria, East Timor Leste,Yemen and Venezuela. To boost E&P activities, the state-run marketer has incorporated Ind-OIL Overseas, a special purpose vehicle for acquisition of E&P assets abroad; in consortium with OIL. IOC is also associated with two successful discoveries in oil exploration blocks, one each in India and Iran.
BPCL, through its E&P arm, Bharat Petro Resources, holds participating interests in 26 exploration blocks, in consortium with other companies.