Venezuela owes ONGC Videsh $500 mn in dues
OVL had put $355.7 mn in the project; dues have been building up since the term of late president Chvez
New Delhi: Unpaid dividends due to ONGC Videsh Ltd (OVL) from Venezuela’s San Cristobal oil exploration project have crossed more than half a billion dollars, potentially affecting India’s energy security plans.
The plunge in oil prices has stoked concerns that Venenzuela may default on its bond obligations. Oil accounts for 97% of the South American nation’s export revenue.
OVL bought a 40% stake in the San Cristobal project in 2008. Corporación Venezolana del Petróleo (CVP), a unit of state-owned Petróleos de Venezuela SA (PDVSA), owns the remaining stake. The joint venture Petrolera IndoVenezolana SA (PIVSA) operates the 160.18km acreage in the Orinoco Heavy Oil belt. “We have to be paid around $500 million. The issue has been pending," said an OVL executive, requesting anonymity.
The National Democratic Alliance (NDA) government is placing special focus on the importance of energy diplomacy, specifically with reference to building India’s relationship with energy-rich regions. State-owned OVL’s $2.1 billion acquisition of a stake in Imperial Energy’s Siberian deposits has also come a cropper.
OVL has made an investment of $355.7 million in the San Cristobal project. The dues have been building up since the term of late president Hugo Chávez’s government, which had appropriated earnings from state-owned Petróleos de Venezuela to finance social spending.
India is struggling to meet its ambitious targets for energy security, with the country having to import as much as 77% of its energy needs. Prime Minister Narendra Modi wants imports to be cut by half by 2030.
Queries emailed to the spokespersons of India’s petroleum and external affairs ministries, OVL and the Venezuelan embassy in New Delhi remained unanswered till press time.
However, OVL, which along with other Indian firms is part of a global consortium developing the Carabobo 1 Norte and Carabobo 1 Centro blocks in the Orinoco region, has decided to stay the course. “We can’t walk away. They are the largest resource holder. One has to stay the course in places like these or Iran," added the OVL executive cited above.
PDVSA couldn’t be contacted.
Overseas firms find it tough to do business with PDVSA in oil-rich Venezuela. Then vice-president Nicolas Maduro won a controversial presidential election against Henrique Capriles, governor of Miranda state, after Chávez’s death. The government has been criticized for using PDVSA as a political tool.
“The public sector units screen various countries and they have a country-specific risk model. The discount rates which they use for evaluating the deals considers the relevant risks. Despite that if there are issues, one has to live with that," said K. Ravichandran, senior vice-president at Icra Ltd.
India is hopeful that its decision to continue to engage with Iran, disregarding Western sanctions aimed at stopping the nation from developing nuclear weapons, will help it land lucrative oil deals in the country. Once the sanctions are lifted, Iran is likely to open up its substantive hydrocarbon reserves to Indian firms, which may also include production-sharing contracts as part of a payback. An Indian consortium comprising OVL, Indian Oil Corp. and Oil India Ltd won a bid for the Farsi block in 2002 from National Iranian Oil Co.
Indian firms have been facing difficulties in nations such as South Sudan, Syria, Libya and Yemen. This comes at a time when Oil and Natural Gas Corp. (ONGC) is battling concerns over its domestic production capabilities and falling yields at its ageing oilfields. According to ONGC’s Perspective Plan 2030, the firm is targeting the production of more than 130 million tonnes of oil equivalent in 2030, of which half will come from assets owned by OVL. OVL has set a target to achieve 20 million tonnes by 2017-18 from the current levels of 8.36 million tonnes of oil and oil equivalent gas.
Experts concur with OVL’s approach. “In Venezuela we are sitting on signed contracts. These are producing assets with the country having a large resource base. One must bide the time," said R.S. Butola, a former chairman and managing director of OVL.
“The country will go through various difficulties. These are long-term contracts. They will come out of this. One has to wait," added Butola who also headed Indian Oil Corp.
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