Millennium Post

OVL looking for equity partner in Vietnam project: MD P Garg

Having extended its stay in South China Sea to promote India's strategic interest, state-owned Oil and Natural Gas Corp is looking for an equity partner to continue exploration for oil and gas offshore Vietnam.

ONGC Videsh Ltd, the overseas investment arm of ONGC, had in July 2012 reversed its decision to exit Block 128 as Hannoi offered additional data that could help it make future exploration economically feasible and discovering hydrocarbons commercially viable.
‘We are looking for a partner for Block 128 where we currently hold 100 per cent interest. We are talking to (Vietnam's national oil company) PetroVietnam and some others,’ OVL Managing Director S P Garg said here.

OVL, he said, wants to retain a majority 51 per cent stake in Block 128 and the remaining it wants to offer to PetroVietnam to de-risk exploration in the block over which China had claimed territorial rights.

Ignoring objections from China, OVL had in July 2012 decided to continue to explore for oil and gas offshore Vietnam in the South China Sea. OVL had in June 2012 decided to return Block 128 to Vietnam as exploration there wasn't commercially viable but it did an about-turn at the insistence of the Ministry of External Affairs which wanted India to continue its presence in the South China Sea. Vietnam gave a two-year extension of exploration period, which now expires in 15 June, 2014, he said.

China had opposed India's presence in the region, claiming its own territorial rights over the potentially energy-rich sea. China claims sovereignty over much of the South China Sea, including areas close offshore some of its bordering states, putting it in conflict with Vietnam, the Philippines, Malaysia and Brunei. The July 2012 extension of exploration phase came at a time when China National Offshore Oil Corp, or Cnooc, offered nine blocks in the South China Sea for joint exploration with foreign companies, including parts of Block 128, which Vietnam says is inside its 200-nautical-mile exclusive economic zone granted under the United Nations' Law of the Sea.

PetroVietnam had urged China to cancel bidding for the blocks, saying they are in Vietnamese waters. The fate of the bidding round is unknown.

Asked why OVL decided to stay put in Block 128, Garg said Vietnam had offered additional data which the company wanted to study. ‘We as OVL, we make investments based on commercial considerations and on energy security considerations and not on strategic considerations.’
OVL had in 2006 won rights to explore in two adjacent blocks — Block 127 and 128 in Phu Khanh basin in South China Sea. It relinquished or surrendered Block 127 as a well drilled in 2009 found no hydrocarbons.

After the fulfilment of contractual obligations, Block 127 was relinquished. Efforts to drill a well in Block 128 were unsuccessful due to severe logistic constraints in anchoring the rig on a hard sea bottom at the proposed drilling location.

Considering previous experience and perceived risk-reward analysis, Block 128 was found to be techno-commercially not viable and the Board of OVL had decided to relinquish the block. It, however, decided to continue with the block following request from Ministry of External Affairs and the Vietnamese government.

OVL continues to own 45 per cent in Vietnam's offshore block 6.1. OVL's share of production from the block was 2.023 billion cubic metres of gas and 0.036 million tonnes of condensate. In November last year, Vietnam offered to give OVL five offshore oil and gas exploration areas without bidding, in a move to counter China's influence in the region. The five blocks or areas-17, 41, 43, 10&11-1 and 102 & 106/10 lie outside the territory claimed by China in the South China Sea.

OVL will study the data on the blocks and has the option to pick and choose from the blocks. It can even take all of them and also has to option not to take any of them, officials said

If OVL decides to take any or all the blocks, a Production Sharing Contract (PSC) will be signed. Meanwhile, OVL plans to raise $500-700 million loan by pledging future crude oil production from its overseas assets, to fund the acquisition of a Mozambique gas field.

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