Petrol Stop - ONGC bags $19bn oil deal in Venezuela

ONGC bags $19bn oil deal in Venezuela

Thursday, 11 February 2010

12 Feb 2010;timesofindia.indiatimes.com:NEW DELHI: A group of firms led by flagship explorer Oil and Natural Gas Corporation has won the bid for a 40% stake in Carabobo-1 acreage in the Orinoco heavy crude belt of Venezuela, the first major oil auction during 11 years of Hugo Chavez's presidency and three years after acreages were nationalised in the region. This is the first big-ticket success for ONGC Videsh, ONGC's overseas arm that will represent the parent in the grouping, since its acquisition of then London-listed Imperial Energy for over $2 billion in 2008. Carabobo-1 will also be ONGC Videsh's second project in Venezuela after San Cristobal. The Carabobo-1 acreage is estimated to have 31 billion barrels of recoverable reserves and will take $19 billion to develop, starting with a $9 billion initial investment. The grouping will pay a little over $1 billion as signing amount and also extend a loan of similar amount to Venezuela's state oil firm PdVSA. The group also has Spain's Repsol and Malaysia's Petronas as ONGC's equal partners with 11% each, while northeast explorer Oil India Ltd and refiner-marketer IndianOil Corporation are minority partners and have 3.5% each. Together as a bloc, the Indian holding will, thus, be 18%. As investors, the Indian companies together will get some 5-6 million tonnes of crude as equity oil and will have the first right to buy upto 9 million tonnes of the output. The consortium is expected to bring the project into production by 2012-13. The acreage can produce 400,000 barrels of oil per day, or 20 million tonnes in a year. The grouping will form a separate `mixed company' in which PdVSA will hold 60% through its arm, Corporacion Venezulana del Petroleo. The companies will jointly operate the project, a deviation from other acreages where usually the most experienced company is in charge of operations. Since Carabobo crude is thick and cannot be processed in all refineries, PdVSA will supply dilutants till such time `upgraders' are constructed by 2016-17 at a cost of some $6 billion. By the time production starts, ONGC's refining arm, MRPL, too will be able to process such crude. At present, heavy oils are processed mostly by private refiners such as Reliance Industries and Essar and some quantities in state-run units. Carabobo-1 is among the two projects that Caracas put under the hammer. The other project, Carabobo-3, has been won by Chevron along with Japan's Mitsubishi, Inpex and Venezuela's Suelopetrol after paying a signing amount of $500 million. Carabobo-3 will be assigned at a later date.