Monday, April 27, 2009

OVL to quit block in Sudan

27 Apr 2009, Times of India

Caught in the crossfire of domestic political tussle between the federal and regional governments in Sudan, ONGC Videsh Ltd, flagship explorer ONGC's overseas investment arm, is quitting a prospective acreage in the African nation and writing off investments of about $90 million.

The acreage, identified as Block 5B, is in the southern part of the Muglad basin in south Sudan and spread across 20,000 sq km. In May 2004, ONGC Videsh acquired over 24% equity by buying out Austrian firm OMV from a consortium of Malaysia's Petronas, Sweden's Lundin and Sudan's state firm Sudapet. ONGC Videsh later assigned 1% of its equity to Sudapet.

ONGC Videsh is exiting the acreage by deciding against taking part in further exploration work or investing more after the term for first phase of prospecting ends on May 1. A panel of secretaries approved the proposal, including writing off payments made in response to cash calls since the acquisition of the stake and share of expenses.

The decision was taken after the regional government allowed Maldovan firm Ascom to prospect in the acreage in contravention of Sudan National Petroleum Commission's resolution and decrees from the federal government. The Moldovan firm is reported to have dug three exploratory wells in a hurry. But these turned out `dry' as they were dug without proper geological study.

"The idea was that if they could make a wildcat discovery then they could stake claim and keep the block. The Sudan government was trying to resolve the issue through a package deal with the parties..." a government source told TOI. He said the situation was similar to Iraq where the federal government and Kurdistan authorities were at variance over say on oil property. Baghdad had threatened companies, including a private Indian firm, with blacklisting from future acreage auctions for dealing with Kurdish authorities.

ONGC Videsh has other assets in Sudan it is 25% partner in the Greater Nile oil project with China's CNPC, Petronas and Sudapet. It also has an exploration, Block 5A in the Muglad basin. ONGC Videsh gets over 3 million tonnes of oil from Sudan as its share of the production from the Greater Nile project.