The state-run refining and marketing company Bharat Petroleum Corporation Ltd has firmed up a plan to invest Rs 1,000-1,500 crore (Rs 10-15 billion) for its exploration and production business.

The investment will be made over a period of next five years. The phasing would depend on the opportunities.

It plans to bid in the fourth round of new exploration licensing policy. Under the latest round 24 blocks will be on offer, including 12 deep water, 11 onland and one shallow water. Bids will close on September 30, 2003.

As E&P is considered a high-risk business with success rate of only 33 per cent, BPCL will go in for 'farming-in' activities.

The company will look to buy and sell stakes at every stage of the E&P business cycle. This will minimise risk, as the investment portfolio will be hedged.

BPCL's move into the upstream sector of the oil industry was also being driven by its business need to have a foothold in the natural gas business.

Worldwide, natural gas was being perceived as the fuel of the future, set to displace liquid fuels over the next few decades.

The recent gas discoveries have been made in India by private explorers like Reliance, Cairn and Gail. Gas, being cheaper and cleaner, was likely to be the preferred feedstock for industries like power.

A presence in the E&P business would help BPCL maintain its market share in the changed energy business of tomorrow.

Investments in E&P will help BPCL hedge its risks in oil markets and emerge as an integrated energy company with presence in every stage of the value chain - E&P, refining and marketing.

BPCL processes about 20 million metric tonne crude oil every year. E&P investments will give it reasonable supply security as well as get some degree of cover against fluctuations in international crude prices. HPCL has already tied up with Oil India for E&P activity.

BPCL would be joining the procession of public sector oil companies seeking to become vertically integrated energy sector players.

ONGC, a pure E&P company, has now moved into refining and will start marketing soon. IOC and Gail have also gone ahead with E&P plans.