Jubilant Energy to raise exploration cash

Jubilant Energy, the oil and gas exploration arm of India’s Jubilant Group, hopes to raise up to $160m from London’s Alternative Investment Market in the coming months to help finance energy prospecting in north-eastern India.

The company – part of a New Delhi-based conglomerate with interests ranging from pharmaceuticals to pizza – holds exploration rights to three large blocks in the gas-rich Assam-Arakan Basin, where significant gas finds have already been made in neighbouring Burma and Bangladesh.

“This is a great opportunity to invest – it’s an India growth story,” said Hari Bhartia, Jubilant’s co-chairman.

“India’s energy requirement will continue to grow. Whoever has bet in this area has been successful.”

The proposed offer comes on the heels of British oil explorer Cairn Energy’s decision to cash in on its Indian venture – which made the largest on-shore oil find in two decades in Rajasthan – in a $9.6bn sale to mining group Vedanta.

Ajay Khandelwal, Jubilant chief executive, said the company planned to spend $100m to $125m annually for the next two to three years exploring its three north-eastern blocks, and also aimed to acquire at least three new blocks in upcoming auctions.

Proceeds from the London share offering – which will be all new equity – will help finance the work.

This year, Jubilant, which has already invested about $300m, is projecting revenues of just $15m from its 25 per cent stake in the small Kharsang Field, near the India-Burma border, which is producing about 2,000 barrels of oil a day.

But the company expects revenues to pick up sharply in 2012, when its block in the hydrocarbon rich Krishna-Godavari Basin, in which it holds a 10 per cent stake, goes into production, led by the operator, the Gujarat State Petroleum Corp. “Depending on the gas price, my expectation is that Jubilant will be a self-sufficient exploration company by 2014,” Mr Khandelwal said.

Geologically, India’s remote and strife-prone north-east – wedged between Burma and Bangladesh – has some of the country’s highest hydrocarbon potential.

However, it is also fraught with political and logistical complexities, including some of India’s frailest infrastructure. Jubilant is already moving to dig appraisal wells in promising Tripura, but the area is far from potential gas customers.

“Everybody knows Tripura is floating on gas,” said industry analyst Deepak Mehta, director of Petrowatch. “But getting it out is tricky.”

Another two of Jubilant’s north-eastern blocks are in troubled Manipur state, which borders Burma and has wrestled for years with insurgency and conflict between ethnic groups.

Jubilant Energy is being advised by Evolution Securities and Renaissance Capital.