ONGC Videsh Ltd has signed a pact with Venezuela’s national oil firm to help arrange USD 318 million financing for the San Cristobal project in lieu of the Latin American nation clearing its past dues through supply of crude oil.
“OVL and Petroleos De Venezuela S.A. (PDVSA) through their relevant subsidiaries signed two definitive agreements for facilitating redevelopment of the San Cristobal joint venture project in Venezuela,” the company said in a statement.
OVL, the overseas arm of state-owned ONGC, owns 40 per cent of Venezuela’s San Cristobal oilfield and had invested about USD 190 million in the project in 2008. PDVSA holds the remaining stake.
It has not been paid for its share of oil from the San Cristobal field in last few years.
After this agreement, PDVSA has agreed to supply 17,000 barrels per day of crude oil to repay USD 537 million that it owes to OVL.
As part of the agreement, OVL will stand guarantee for the San Cristobal joint venture to raise USD 318 million capital required for raising production from the field to 27,000 bpd from current 18,000 bpd.
OVL had received its dividend from sale of crude oil produced from the field totaling USD 56.224 million for 2008.
But dividends for 2009 to 2013 totalling USD 537.631 million remained unpaid due to cash flow difficulties being faced by PDVSA.
The agreements were signed by OVL CEO Narendra K Verma and the Minister of Petroleum of Venezuela and President PDVSA, Eulogio Del Pino.
San Cristobal project is located in the Zuata Subdivision of proliferous Hugo Chavez Fria Orinoco Heavy Oil belt, in the Junin Norte Block in eastern Venezuela. The joint venture was incorporated in April 2008 consequent to a Memorandum of Understanding (MOU) signed in March 2005 at New Delhi to jointly develop oil and gas exploration and production projects in Venezuela.
“The agreements provide for mechanism to liquidate OVL’s outstanding dividends from the Project while at the same time, ONGC Videsh needs to obtain long term financing for the capital investments for implementing the Remediation Plan of the Project.
“The Remediation Plan aims to invigorate the field from its current production level of about 18,000 bpd to 27,000 bpd by the use of water flooding technique,” the statement said.
Venezuela is India’s fourth largest source of crude oil, supplying some 23.6 million tonnes or 12 per cent of the country’s annual import in 2015-16.
OVL, along with Indian Oil Corp (IOC) and Oil India Ltd, also holds 18 per cent stake in Venezuela’s Carabobo-1 project, which currently produces about 16,000 bpd of oil and is expected
to reach 90,000 bpd by end of 2017.