Home > companies > news > Amid regime change in Venezuela, OVL awaits pending payments

New Delhi: ONGC Videsh Ltd (OVL) is still awaiting unpaid dividends of at least $155.5 million from Venezuela’s San Cristobal oil exploration project as the late President Hugo Chavez’s government had appropriated earnings from state-owned Petróleos de Venezuela SA (PDVSA) to finance social spending.

State-owned OVL purchased a 40% stake in the San Cristobal project in 2008. Corporación Venezolana del Petróleo (CVP), a unit of PDVSA, owns the remaining stake in the project. In addition, OVL’s share of investment in the project was around $191 million till 31 March 2012. The joint venture Petrolera IndoVenezolana SA (PIVSA) operates the 160.18 km acreage in the Orinoco Heavy Oil belt.

Dividends for 2009 and 2010 amounting to $72.34 million and $83.2 million, respectively, remained unpaid because of cash flow difficulties faced by PDVSA, according to information available on OVL’s website.

Also, with the introduction of a new windfall tax levied in April 2011, OVL had paid $168.89 million as taxes in Venezuela.

“They are not paying back even as the only realization that OVL makes is on dividend," said a senior executive at parent Oil and Natural Gas Corp. Ltd, requesting anonymity.

PDVSA couldn’t be reached for a comment.

“As long as the political situation remains uncertain, PDVSA’s partners seem unwilling to make capital disbursements for new areas to be developed (mainly the extra-heavy oil of the Orinoco Belt). Most of them are maintaining their long-term plans in the country, given the great reserves, but are in wait-and see mode," Barclays Cross Asset Research wrote in a 7 March report. “Additionally, service companies are facing delays in the payment of their bill by PDVSA, which is affecting their operations and even their willingness to keep providing the service."

OVL is still hopeful about the project which produces around 40,000 barrels of oil per day (bpd).

“Even if some commitments have not been made, they will be met. Things will change. The project is quite good and the returns are better than other projects," said D.K. Sarraf, managing director of OVL. He declined to disclose the total outstanding amount to be received from PDVSA.

Supplies from India’s domestic energy sources are limited and the country depends heavily on imports—as high as 80% for crude and 25% for natural gas.

India’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) now to around 1,500 mtoe, according to the oil ministry.

Other state-owned companies such as Indian Oil Corp. Ltd and Oil India Ltd are also concerned about their investments in oil-rich Venezuela in the aftermath of Chavez’s death. The companies, which have invested billions of dollars in the South American nation, have little option but to wait and watch whether the post-Chavez regime continues its hydrocarbon policy.

“In the short term, political uncertainty seems to be delaying the planned production increases for this year. On the one hand, the capacity to increase investment for PDVSA will be limited, and management will remain distracted from the industry’s core activities. On the other hand, as long as the political situation remains uncertain, PDVSA’s partners seem unwilling to make capital disbursements. Therefore, production could remain stagnant in 2013," the Barclays report added.

Significant investments made by Indian companies in Venezuela include one as part of a global consortium developing the Carabobo 1 Norte and Carabobo 1 Centro blocks in the Orinoco region.

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