Prod in Mozambique could start only by 2017-2018: Taneja

US gas company, Anadarko yesterday informed that the company is drilling oil and gas off the coast of Mozambique. According to the company, the Mozambique block has made another discovery of gas leading to 3-10 trillion cubic feet (Tcf) increase in recoverable resources and the total now swells to a mammoth 27-60 Tcf. Indian companies, Videocon and BPCL have 10% stake each in that offshore block and since the news came in, both stocks have seen quite an upside.

Narendra Taneja, South Asia Bureau Chief of Upstream tells CNBC-TV18 said that although, the Mozambique offshore is supposed to be floating on gas, it is a comparatively new kid on the block with no big history of offshore oil and gas exploration. According to him, the figures that have been quoted are just estimates and are yet to go for further scientific investigation.

Hence, Taneja cautions that there is a long way to go and for commercial production to start, it can take as long as 2017 or 2018. Although, he considers this to be a significant discovery, he feels that if everything goes well, 15 Tcf discovery can be expected by the end of next year

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: How can you compare this to the KG Basin, how much more is in terms of potential gas or oil discoverable?

A: Mozambique offshore is supposed to be floating on gas but not to forget that Mozambique is rather a new kid on the block, there is no big history when it comes to offshore oil and gas exploration in the Portuguese speaking African country. All the companies are learning and this is also a medium size independent company from the US.

They had no experience on Mozambique in the past and if you read the statement that they put out yesterday carefully, these are just estimates, making it clear that they are yet to go for appraisal. They are yet to go for more scientific investigation before they can come out with exact size of reserves and for that matter, also the nature of the reservoir.

Essentially, in exploration production language, it's a very long way to go. Comparing it with discoveries in the Bay of Bengal, D6, originally the discovery was about 35-40 Tcf. They scaled it down to 25 Tcf, then to 10 Tcf and now it is down to less than 7 Tcf.

Similar is the story with Gujarat State Petroleum's discovery in the Bay of Bengal offshor. Initially they said it was 40 Tcf gas and it's now down to less than 2 Tcf. I would say that when it comes to BPCL and Videocon's discovery in Mozambique, its very early days, it’s not time to go to the rooftop and open the bottle of Champaign.

But it certainly is a significant discovery and especially, for a company like BPCL which is a downstream company, its balance sheet is under tremendous pressure and Videocon which is a rather small company when it comes to oil and gas activity has been very lucky with Rawa in the Bay of Bengal. It has again been very lucky this time.

Whatever these two Indian companies get, I think it's almost like a lottery because they are just partners, they are not operators in Mozambique. Even for the Texas based company, it's a very significant discovery. We will have to wait and my assessment is if everything goes well, we are talking here roughly maybe 15 Tcf discovery by the end of next year and if converted into LNG which require huge investment from the two Indian partners.

Q: Coincidently, we are getting some source based information with regards to RIL where apparently they have written to the oil ministry and they have claimed damages if the Government of India (GoI) doesn't approve the KG-D6 costs and RIL has basically blamed the government for the following production at KG-D6 and wants appropriate relief with regards to that. We understand that the RIL Council has written a 13 page letter to the oil ministry. Any thoughts with regards to this dispute and basically RIL's claims on the GoI?

A: It's very difficult to say if RIL can blame the Government of India but, the fact remains that government has not been helping RIL. RIL is the first Indian company to get into a deep water project like D6. That basically puts India in this very elite club of deep water exploration production companies in the world, which includes only seven or eight countries around the world.

The government has definitely not helped. My experience is that the government doesn't really have the competence or the expertise to monitor deep water projects like D6 and the same goes for the Directorate General of Hydrocarbons (DGH). My personal experience is that they lack the expertise and with all the report that CAG had come out, I really wonder if they have the expertise and the competence to question the kind of things they have questioned there.

I personally feel that it's probably more to do with the perception which was created in barely the last one and a half year, thanks to all those scams since Commonwealth. I personally feel that therefore, the officials in all CAG and DGH and ministry of petroleum have become over cautious. I don't think they have the right expertise.

Right expertise is only with Reliance and maybe to some extent with BP which has become a collaborator and largely with foreign companies. 80% of Reliance's work has been done by foreign contractors, so if I have to say whether Reliance have 100% competence to handle a deep water project or not, my answer is no.

I think even Reliance is learning. I really wonder where this expertise that's been used by the GoI agencies and GoI coming from. I personally feel they have not helped the situation. As far as the blaming is concerned, I think government is government, we can always say that please acquire expertise, please take experts wherever you need to take and before you make such a situation.

Q: How much time do you think it will take for the gas and oil at Mozambique to hit in terms of commercial production?

A: Very long time. Here we are talking about 2017 or 2018 because it is a deep water project. It is going to take a long time. Mozambique government is also still learning all these things.

I think you will find along the way that Mozambique government is also not going to be as helpful as for instance the Indian companies and the US companies would be expecting. It is 2017-2018 and don't forget that it would also include creating infrastructural facilities for LNG exports.

It is a long learning lesson for the government of Mozambique, regulatory mechanism would need to be put in place and the easiest thing is finding a buyer wouldn't be difficult because countries like India, Korea, China, Japan are already waiting for Mozambique's LNG.

It is just across the pond as they say it, because this discovery is in the Indian Ocean. The only unfortunate part of the story is this part of the Indian Ocean is not in India but in Africa and India is very evident destination for LNG.