Bharat Petroleum Corporation Ltd, the refining and marketing major, is in talks with Oil and Natural Gas Corporation for deep-sea exploration.

"We are holding talks with ONGC for a partnership to enter deep-sea exploration. We can jointly bid for an exploration block under the new exploration licensing policy," according to a senior BPCL official.

BPCL is foraying into the exploration and production business in order to hedge price risks in a highly volatile market. For its backward integration into upstream sector oil, the corporation has earmarked Rs 1,000-1,500 crore (Rs 10-15 billion) in the E&P business.

S Behuria, chairman and managing director of BPCL, told mediapersons in Mumbai on Monday that the corporation was considering the entire gambit of upstream operations such as exploration, production and development of oil/gas fields.

"In order to balance risks, we would be looking into a mix of exposure to all the three phases with an E&P budget of Rs 1,000-1,500 crore over the next five years. We are also bidding for exploration blocks under NELP-IV," he added. Behuria was briefing the media after the annual general meeting of the corporation.

"Sale of stakes in these blocks (called 'farming-in') will also be considered and we are seriously looking at this option. It is also imperative for the company to enter the gas business to maintain its share in the energy market in the country," he said. BPCL currently processes around 20 million tonne of crude oil.

The corporation has taken a number of steps to increase its supply of petroleum products. It has hiked its capacity at the Mumbai refinery to 12 million tonne per annum by October 2004. It has also extended the Mumbai-Manmad pipeline to Indore. "The Indore pipeline will be later extended to Delhi," Behuria said.

Besides this, a new pipeline along the Numaligarh Refinery Ltd and Oil India Ltd is being considered which will connect Numaligarh with Siliguri.

"We plan to enter into contracts on a tonne-to-tonne exchange and purchase sale basis with other players in the country," he added.

In addition to a reasonable supply security, BPCL is also planning an aggressive growth strategy in the retail sector by increasing the network by around 700 new sites this year.