New Delhi: ONGC Videsh Ltd, the overseas investment arm of Oil and Natural Gas Corp, is likely to sign agreement in next couple of months for an oil block in Iraq that was awarded to it by the erstwhile Saddam Hussein regime.
“Negotiations on the contract for Block 8 in Western Dessert have been concluded and the concession agreement is ready for signing,” a source in know of the development said.
OVL had commenced seismic survey on the block that the Saddam Hussein regime awarded to it in November 2000, before the US-led war on Iraq. The block, which is on the Iraq and Kuwait border, has a reserve of about 645 million barrels, of which 54 million barrels was recoverable.
The company will hold 100% interest in the block and will invest $250 million in initial exploration phase.
The contract will be similar to the one China National Petroleum Corp (CNPC) signed last month for developing Al-Ahdad oilfield in central Iraq. “It will be a service contract wherein OVL will be paid about 18% rate of return on the investment it makes in finding and producing oil from Block 8,” the source said.
OVL can take its fee in kind - that is in form of crude oil. “OVL can practically ship of the crude oil produced from Block 8 to India,” he said.
It would act as the operator of the field until it recoups all its costs and set up a joint operating company with the local operator to take over once development costs have been repaid.
Indonesia’s Pertamina and state Petrovietnam, who signed two contracts in 2002 for Block 3 in the Western Desert and Amara oil field in the south, respectively, are also involved in renegotiations of oil contracts with Baghdad.
has also pre-qualified OVL for its tender of eight oil and gas fields.
Baghdad has, however, refused the Tuba oilfield, for which OVL, in consortia with Reliance Industries and Algeria’s Sonatrach, were in negotiations before the US attack on Iraq.
OVL-Reliance-Sonatrach had been shortlisted for Tuba in 2000 but the contract could not be signed. Tuba lies in southern Iraq between the Rumaila and Zubair oilfields and could reportedly yield as much as 300,000 barrels per day (bpd) of medium and heavy crude.
“Iraq is renegotiating terms for all the contracts signed by the previous Saddam Hussein regime. But those like Tuba which had not been signed, the fields will be put on auctions,” he said.
Exploration and development contract for Exploration Block - 8, Western Desert, Iraq was signed by OVL with the Oil Exploration Company of Iraq, on 28 November, 2000, at New Delhi. The block has a reserve expectation of about 645 million barrels.
As per the 2000 contract, OVL was to reprocess and interpret existing 2-D seismic data. It was also to acquire, process and interpret 1,000 km of 2D and carry out 300 sq km of 3D seismic survey besides drilling two wells.