ONGC Videsh wants IOC as partner in Venezuela

Oil and Natural Gas Corporation's overseas investment arm, ONGC Videsh, has sought refiner-marketer Indian Oil Corporation's (IOC) partnership in its acquisition of exploration and production assets in three projects of Venezuela's Carabobo area in the Orinoco basin, sources told.
Since Venezuela is developing the Carabobo acreage as an integrated project envisaging a refinery and facilities to prepare the heavy crude to suit units that are not state-of-the-art, ONGC Videsh wants Indian Oil as the partner. Sources said initially, private refiner Reliance Industries had been thought about as it is a substantial buyer of Venezuela crude. The idea was dumped since it was felt that having another state-run firm would add weight to the partnership as the Carabobo equity was coming as part of a deal between the two governments.

Last April, the Venezuela government had given ONGC Videsh a 40 % stake in the San Cristobal oil project for $ 355 mm, including a $ 173 mm signature bonus. Around the timeof signing the Orinoco deal in Caracas, Venezuelan President Hugo Chavez and oil minister Rafael Ramirez said they were agreeable to ONGC Videsh taking equity in the Carabobo project.
ONGC Videsh, however, may have to take Oil India Ltd (OIL) too as a partner since the oil ministry has taken a view that Indian Oil does not have the approval from the Cabinet Committee on Economic Affairs to pursue exploration projects abroad. The ministry feels since the consortium of Indian Oil and Oil India has such permission, ONGC Videsh should talk to the consortium instead of Indian Oil alone.

The sources said ONGC Videsh had written to Indian Oil inquiring how much equity it would be interested in for joining hands for the Venezuelan project. Since the ministry was kept in the loop, it clarified the technicality in Indian Oil's ability to partner overseas exploration project. The ministry's stand, however, is unlikely to substantially impact ONGC Videsh's plan.
The Orinoco heavy oil basin, some estimates say,may have reserves of up to 270 bn barrels in addition to the existing 80 bn barrels that has been proven. Venezuela is at present carrying out an exercise, called Magna Reserva, to certify the reserves, and is willing to give companies involved in the programme stakes in acreages they certify.

ONGC Videsh is among a host of national oil companies from Brazil (Petrobras), Iran (Petropars) and China (CNPC) to join the Chavez government's efforts to certify oil reserves in the Orinoco basin.
The San Cristobal field had 232 mm barrels of reserves and 210 mm of this remains to be pumped out. ONGC Videsh chief R.S. Butola had then told he was confident to raise the recovery factor from 22 % to 35 %, taking the production to 40,000 bpd in the near term, with a further upside. ONGC Videsh has planned to invest $ 446 mm to improve production from this field.