New Delhi: India’s biggest energy explorer Oil and Natural Gas Corp. Ltd (ONGC) said its overseas crude output will fall this year as fields age, and an increase is likely after new areas in Brazil and Myanmar start production by 2012.
ONGC Videsh Ltd, the unlisted overseas arm of the state-owned company, may produce 9% less oil and gas at fields in Russia, Colombia and Sudan in the year to 31 March, R.S. Butola, the New Delhi-based managing director of the unit, said in an interview. “Output will probably fall to about 8 million tonnes,” he said. That’s equivalent to 23% of ONGC’s total production last year.
“If we don’t buy any new assets or discover fields, production this year will be less,” Butola said on phone. “Low prices are also a reason we aren’t increasing output at new fields.”
ONGC bought UK-based Imperial Energy Corp. Plc. last year, India’s biggest overseas energy acquisition after being outbid by Chinese rivals in Nigeria, Kazakhstan and Canada. A plan to quadruple output at Imperial’s Siberian fields has been delayed because oil prices in New York have averaged about $49 (Rs2,332.40) a barrel below the August level, when the transaction was first announced.
“ONGC has been taking steps to increase production at both domestic and overseas fields, but progress has been very slow,” said Rohit Nagraj, an analyst at Prabhudas Lilladher Pvt. Ltd in Mumbai, who has an “accumulate” rating on the parent company’s stock. “Some new overseas fields will be put into production probably next year.”
ONGC, supplier of 25% of the country’s crude needs, has been struggling to increase production at three decade-old domestic fields.
“Output at ONGC’s overseas ventures may increase to 10 million tonnes in two years as fields in Brazil and Myanmar start production,” Butola said. Russia’s Sakhalin-I field and Colombia’s Velasquez fee mineral project, which it operates in partnership with China Petroleum and Chemical Corp., may also produce more after drilling additional wells, he said.
ONGC Videsh plans to spend $1.8 billion on production and drilling this year, little changed from the period ended 31 March, according to Butola. The unit will focus on bidding for new fields in countries where it owns assets because it has good relations with the governments in those countries, the managing director said. “Expenditure will also be less if we buy more in the countries we are present in as costs such as manpower are minimized.”
The explorer has stakes in oil fields in Venezuela, Colombia, Brazil, Cuba, Trinidad and Tobago, Congo, Egypt, Libya, Nigeria, Sudan, Iran, Syria, Myanmar, Vietnam, Russia and Turkmenistan, according to its website.
“We don’t want to spread ourselves thin,” Butola said. “Our strategy would be to consolidate in countries where we are present.”
ONGC has climbed 67% in Mumbai trading this year, outpacing the 52% gain in the benchmark Sensex.
The explorer, which bought Imperial Energy for £1.4 billion (Rs10,528 crore today) last year, may produce less than planned at the company’s field’s because of low prices, ONGC chairman and managing director R.S. Sharma said on 26 March.
The Indian company bid for Imperial when oil prices were more than $120 a barrel and completed the acquisition in March, when crude had tumbled to less than $50.
Imperial Energy had set a target of 35,000 barrels a day of oil by the end of 2009 and 60,000 barrels a day by the end of 2010, according to the company’s website.