Peace accord boosts ONGC Sudan assets
By S. P. S. PANNU, The Telegraph
NEW DELHI, Jan. 18, 2004 — Oil and Natural Gas Corporation (ONGC) expects the value of its oil assets in Sudan to shoot up further with the signing of the peace accord between the Sudanese government and the SLPA Christian rebels last week.
Senior ONGC officials told The Telegraph that with the signing of the peace accord and with the US poised to lift its sanctions against Sudan, the country was set to become a hot destination for global oil majors.
The increase in demand for the rich oilfields and high-potential oil exploration blocks is bound to enhance the value of these assets, they added.
ONGC Videsh, the foreign arm of ONGC, has a 25 per cent stake in the Greater Nile oil project in Sudan and a substantial stake in two adjoining oil exploration blocks.
Senior ONGC officials said the fact that SLPA chief Gurang announced in Khartoum that the peace accord was “irreversible” is very significant from the standpoint of stability in the long run.
ONGC Videsh was able to get hold of the stake in the Greater Nile oil project at a cheap price because the Canadian company, Talisman, wanted to exit Sudan in haste due to pressure from radical Christian church groups. The Indian oil major had gained from what was essentially a distress sale.
With the output of the Greater Nile oilfield in Sudan anticipated to go up from 12 million tonnes per year at present to 15 million tonnes soon, ONGC Videsh is expected to recover its entire investment of around $600 million in the project in the next two years.
There was some scepticism in India as well over ONGC Videsh’s entry into Sudan as the country was in the bad books of the western powers and considered unstable because of the civil strife.
However, ONGC Videsh’s contention was that it was being able to buy the lucrative oilfield only because western countries were not interested in bidding for them. Indian companies cannot compete with the financial muscle and political clout of the western oil majors.
Secondly, the Chinese and Malaysian oil companies already had a stake in the Greater Nile project and ONGC Videsh would not be the only foreign company to do business in Sudan.
Sudan is also keen on ONGC Videsh taking up a $750 million downstream project for expanding its refinery and laying an oil pipeline. The Indian government, however, wanted ONGC Videsh to rope in other partners for this project in order to reduce the political risk.
Senior ONGC officials said a review of this risk factor may be required in the light of the new peace agreement.
OVL has also undertaken community development works in Sudan in order to enhance its goodwill among the local population. It has set up two hospitals and an ambulance service for the villages. Around 1,000 Jaipur limbs have been sent to the country to help minefield victims.