Videocon's Mozambique block finds 17bn barrels of oil

Gas company Anadarko has discovered a substantial quantity of gas in two gas wells off the coast of Mozambique. India's Videocon and BPCL, both have 10% stake in those gas wells and it is being considered as one of the largest gas finds in the world. 

Anadarko informed that its Atum Discovery Well encountered 92 metres gas pay. Atum and Golfinho gas wells are also believed to hold 10-30 Tcf of gas. The company further told that the offshore Area I Recoverable Resource is approaching 100 Tcf of gas.
In an interview with CNBC-TV18, Venugopal Dhoot, CMD, Videocon is elated with the discovery and says that it is indeed a very good news for the country. He said that the exploration could lead to the procurement of as much as 17 billion barrels of oil and India is eligible for a 20% share.
Dhoot further added that the Rovuma Area I is one of the largest ever gas finds globally. However, only two-third of Rovuma's area has been drilled and further drilling is expected in the second half of CY12. Although, the company has not fixed any timeline for oil and gas demerger, Dhoot calculates the NPV(Net Present Value) of Videocon's stake in the Mozambique block at USD 6.5 billion.  Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying videos. Q: Can you tell us about the discovery off the coast of Mozambique? What is the amount that Anadarko is talking about?
A: It's a very good news for India. India will be having 20% of the gas. Anadarko said that about 60 tcf of gas has been found and it is approaching the recoverable 60 trillion and it is approaching towards 100 trillion recovered reserve. It is equal to 17 billion barrels of oil and Videocon and BPCL both have 20% share in the gas well.
It's a very big find and very big news. I should say this is one of the largest gas find in the world as on today and from the beginning Mozambique field has been very successful to Videocon and it started from 10 Tcf and now it is talking about 100 Tcf. This is enviable to any gas producer in the world. Q: Just wanted to come down with regards to the 10% stake that Videocon holds in this oil discovery. What exactly would it value your stake at this point in time and give us a sense in terms of the modalities of the possible demerger of your oil and gas business? Where would all of this stand now?
A: That demerger will come later. I think NPV calculation at today's rate should come to around USD 6.5 billion for Videocon. It's a great news. It's a great success. That should be the value and our other partners would also benefit.
This is just the beginning. Just one-third area of Mozambique has been discovered so far. Mozambique is now approaching to be as big as Qatar and it is good news for Videocon and India. Q: When will the money actually start hitting the P&L of Videocon itself? How much time from now to actually starting to commercially drill and sell the gas and the oil and when will you get dividends, will it be one year, two years, three years?
A: In this type of oil exploration business, the profits are calculated in a different method. Once the oil has been struck, the whole NPV comes on the balance sheet as an asset. Hence, the entire finding is now my valuation and that valuation is coming on the balance sheet.
When to drill, how to drill and issues related to these will have to be decided later. Since one of the biggest fields, globally, Anadarko and the operators will decide when to drill and how to get maximum profit out of it. But, profit has already accrued because it comes on the balance sheet as an asset. So, whenever they start the production, the money and the dividend can come in. Q: What is the potential of further discoveries now within the Mozambique region because this has been quite significant? What is the potential and how many discoveries are currently underway?
A: I think we have been exploring about one-third area so far and these are the results. Exploration in another two-third is also expected to be very promising, It will be done in September and then after three-four months.
Our geologists sitting in Chennai always say that they have studied the seismic data and it should have a very great potential. Going by the result given by one-third area, we can expect better results from the rest of the area as well. Q: At the moment, you are only going by the overall increase in the Net Present Value for your company because of your 10% stake. You cannot give us a timeline as to when the gas might actually be drilled?
A: When the gas line might actually be drilled depends on the global energy scenario and that will be decided by Anadarko. It will be decided in such a way that the company makes maximum benefit from this find.
_PAGEBREAK_ Q: You are not planning any revamp of your gas holdings into one company. Will this stay with Videocon Ltd.?
A: Yes, all the oil and gas companies abroad, from Australia, Timor Sea, Mozambique, Brazil and India's Rawa should come under one company. A demerge proposal has been approved by our board and it will very soon be done. That oil company will come under one umbrella and the consumer durables company will come under another umbrella. Q: So Videocon shareholders should expect shares in that demerged unit?
A: It is too early to say when it will happen. They should expect it. Otherwise also, my shareholders are the owner of each and every drop of my share of oil. So that's not a problem for them. But, how it will be organized will be decided at the time of demerger. Q:When will the demerger be announced, in a month, two months, two quarters?
A: We have not thought about the timeline. Today, we share the good news of Mozambique only. Q: There were talks that Cove Energy holds 8.5% and they were looking to sell out and there were other bidders and Shell PLC was bidding for that. Any updates with regards to the bidding process and what sort of valuations would that currently have and if you could just take us through details on that?
A: As far as I know, Cove Energy wants to sell it because their business is to get the exploration field, develop it and sell it. They would like to sell it and accordingly, they have put it for sale.
Bidding war is going on between Shell, the energy giant of the world and PTT of Thailand. When the war started, there were discoveries after discoveries and so everybody is putting in new prices. Where it will end, I don't know. Q: Considering that your stake will be revalued to such a large extent, would you look at possibly selling off some amount of your stake and getting some gains from that or would you just retain your 10% stake?
A: Today my idea is that we should bring back these guys to India. BPCL also wants 20% of our share to come to India and we shall sell it here because it's a huge market.
Apart from that, we want the Government of Mozambique, who is the owner, should also make maximum profit out of it. It will be arranged in such a way that it turns out to be a win-win scenario for both of us.