Greater Noida/New Delhi: In an attempt to reduce potential losses from its $2.1 billion acquisition of Imperial Energy Corp. Plc’s Siberian deposits, ONGC Videsh Ltd (OVL) has offered Liberty Resources Llc a stake of up to 30% in Imperial. That’s subject to Denver-based Liberty striking success in the Bazhenov shale formation in the region.

“A technology partnership agreement has been signed with Liberty Resources," said an OVL executive on condition of anonymity. “The agreement with Liberty has been structured in such a way that it will be a mix of fee and in the event of them finding success in shale, we will give them partnership. This will also make them put in their equity portion."

An oil shale is a fine-grained sedimentary rock containing kerogen, an organic material that produces oil and gas upon distillation. Properly processed kerogen can be converted into a fuel similar to petroleum.

According to the plan, a total of four wells will be drilled requiring an investment of $10 million.

Bazhenov may hold around 360 billion barrels of recoverable reserves. Yet, OVL’s acquisition of Imperial in 2009 to secure the Siberian deposits and reduce India’s dependence on imports has failed to meet projections because of falling oil production, and prompted the Comptroller and Auditor General of India to fault the purchase.

Imperial’s main asset is its Siberian fields, with acreage of around 16,800 sq. km Apart from the acquisition cost, OVL has invested around $500 million.

“As a result of its commitment to exploit the hard to recover oils from tight sand reservoirs as well as Bazhenov shale in its acreages, on the 12th of September 2013 Imperial has signed an technology partnership agreement with Liberty Resources," Imperial Energy said in a statement.

Liberty Resources couldn’t immediately be contacted for comment. Another OVL executive, who also didn’t want to be identified, said: “There are two parts of the agreement. While one is the service contract, the other is for giving equity stake to Liberty. It will also reduce our risk."

While peak oil output from the Siberian fields was estimated at 80,000 barrels per day (bpd) by 2011 at the time of the purchase, it was lowered to 45,000 bpd, Mint reported on 17 June 2010. The field is currently producing only around 15,000 bpd.

Even Russian conglomerate Sistema JSFC has valued Imperial Energy’s assets at $500 million, a quarter of the sum Oil and Natural Gas Corp. Ltd (ONGC) paid for the acquisition. Also ONGC set aside $408 million to cover the impairment of Imperial’s asset value. ONGC has decided not to invest more money in Imperial Energy until it has a suitable strategy in place.

India’s energy demand is around 700 million tonnes of oil equivalent (mtoe). To meet the country’s growing energy demand, ONGC is targeting production of more than 130 mtoe in 2030, of which half will come from OVL’s assets. Till now, state-owned firms have invested 64,832.35 crore on overseas energy assets, according to India’s petroleum ministry.

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