Sunday, May 3, 2009

Flop Sudan oil venture results in $89m loss

New Delhi, April 26: The Congress-led UPA government has written off ONGC’s $89m investment in a Sudanese block.

The project, which was flagged off by the BJP’s Ram Naik, as the oil minister of the previous NDA regime, was scrapped after all the three wells struck by ONGC in exploration block 5B were found to be dry.

An empowered committee of secretaries wrote off the investment, following ONGC’s decision to pull out of the block.

ONGC Videsh Ltd (OVL), the overseas arm of ONGC, had picked up a 23.5 per cent stake in the block. The government had then stated that OVL had entered into an agreement to acquire a stake in Sudanese exploration block 5B, which has “bright oil prospects.”

ONGC had said, “This is an important acquisition for OVL as it consolidates our presence in an oil bearing region which continues to show high potential. Gravity and seismic interpretation show that the Muglad rift basin extends into Block 5B. The structure in the area is similar to the rest of the basin where more than 1 billion barrels of oil have been discovered to date.”

Block 5B is spread over an area of about 20,120 sq km. OVL also has a 25 per cent stake in the Greater Nile Oil Project and a 24.1 per cent interest in block 5A.

Other stakeholders in block 5B are Malaysia’s Petronas (39 per cent), Sudan’s national company Sudapet (13 per cent) and Sweden’s Lundin Petroleum AB (24.5 per cent). White Nile Petroleum Operating Company — a consortium of Petronas and Sudapet — operates the block.

OVL had picked up a stake in the block in 2004.

However, exploration work could not begin before 2006 as the African nation was caught in a civil war.

The first phase of drilling at the three wells cost OVL $89.50 million, well above the estimated investment.

Frequent disruptions because of red tape and security concerns escalated costs.

The wells proved to be dry, adding to the woes of the PSU firm, which has been searching for big reserves since its discovery of Bombay High. Sources said the PSU sought to relinquish its stake in the block after it realised that its potential was meagre compared with the investment.