OVL Sets Sights On Majority Stake In New Sudan Block

by Anupama Airy —
The Financial Express (Bombay)

New Delhi, Aug 3: ONGC Videsh (OVL) is in dialogue with the Sudanese authorities for acquiring a majority stake in a big exploration block. According to senior company officials, Sudanese oil minister Awad Ahmad al-Jaz has extended an invitation to ONGC chairman and managing director Subir Raha to attend the fourth anniversary of the Sudan petroleum day, slated for this month-end. Detailed discussions on awarding a big exploration block to ONGC’s international arm on nomination basis may figure during Mr Raha’s visit to Sudan, they add.

Mr Raha told FE, “we are interested in quite a few blocks in Sudan but it’s premature to say anything at this stage”. Asked if he will take up the issue during his visit to Sudan, he said, “no comments. I have not planned anything as my visit to Sudan is subject to government approval”.

This is for the first time that OVL is talking of having a majority control in an exploration block in Sudan. All other bids submitted by OVL are for acquiring 20-25 per cent participating equity in various exploration blocks in Sudan. Even in the case of the 280,000-bpd Greater Nile Oil Project (GNOP) in the Muglad Basin of Sudan, its stake is limited to 25 per cent. This deal was completed in March 2003 at a cost of $750 million.

Iraq is the only other country which had offered a block (Block 8) to OVL on nomination basis in 2000. OVL is presently awaiting clearance from the Iraqi oil ministry for carrying out seismic surveys.

Officials says in addition to having a controlling stake in a big exploration block, OVL is also keen to acquire participating interest in four other exploration blocks in Sudan. These are blocks 5A, 5B, 9 and 12 for which the company has already submitted the bids.

“OVL is expecting a decision on its participation in these blocks in the next two-three months. If selected, this would mean 3-5mt oil annually for India,” say officials.

Data package for another block – Block 11 – is under preparation by Sudan Petroleum Corporation. OVL plans to purchase this as well and submit a bid, say sources.

Sources also say the Block 5A, which contains the undeveloped Thar Jath field with gross proven and probable oil reserves of 149.1 million barrels, has Petronas Carigali Overseas of Malaysia as operator with 68.875 per cent stake. Austrian oil and chemical group OMV holds 26.125 per cent and Sudan National Oil Company holds the rest 5 per cent.

In Block 5B, Petronas has 41 per cent, Sudapet 10 per cent, OMV 24.5 per cent and Swedish oil concern Lundin Petroleum holds 24.5 per cent. According to sources, OVL has bid for acquiring OMV’s stake in these two blocks.

Incidentally, Petronas has recently bought out Ludin Petroleum’s 40.375 per cent stake in Block 5A for $142.5 million. Petronas originally had 28.5 per cent stake in Block 5A where Lundin was the operator with 40.375 per cent stake.

GNOP is located in the Muglad Basin, around 435 miles southwest of the Sudanese capital Khartoum. According to OVL managing director Atul Chandra, this project is currently producing 268,000-270,000 bpd (about 13mt annually), which is more than what the Mumbai High produces. Of this, OVL’s share is 25 per cent. “Production from the field is expected to go up to 300,000bpd (15mt) by the beginning of 2004,” he says, adding exploration in the adjacent areas is giving discoveries in every second well that is being drilled.

OVl’s consortium partners in the GNOP are China National Petroleum Corporation (40 per cent), Petronas Carigali Overseas, (30 per cent) and Sudan National Oil Company (5 per cent).

OVL has also been invited by Sudan to lay a 700-km product pipeline and participate in a refinery revamp and upgradation project. The product pipeline, from Khantum refinery to the Port of Sudan, is estimated to cost $200-300 million. The refinery upgradation contract is valued at $400-500 million. Also included in the project is capacity expansion of the refinery from 34,000bpd to 71,000bpd.