ONGC Videsh (OVL), the wholly-owned overseas subsidiary of state-run ONGC, may get crude oil in lieu of pending dividend to the tune of more than $500 million from Venezuela. The dividend payments have been pending since 2009 for the San Cristobal project in the Orinoco heavy oil belt in Venezuela.
The development comes in the light of the recent visit of minister of state for external affairs V K Singh to Caracas, where India emphasised the the issues related to ONGC Videsh. Following Singh’s visit, Eulogio Del Pino, president of Petróleos de Venezuela, S A (PDVSA) visited New Delhi to ensure that all issues between the two sides are resolved and opportunities for further investments have been opened up.
Sources privy to the development told FE, “A letter of agreement was signed between PDVA and ONGC Videsh, where Venezuela has agreed to resolve the dividend matters by compensating not in cash but oil.” It has also been decided that India will be helping Venezuela in capacity-building by giving training to its people in the mining sector. During his visit to New Delhi, Del Pino also met petroleum minister Dharmendra Pradhan to resolve a tussle between the two explorers.
In 2008, OVL acquired 40% stake in the oilfield located in the Orinoco oil belt in a joint venture with Venezuela’s national company PDVSA, which hold the remaining 60%. The issue of pending dividend has been heating up since late Venezuelan president Hugo Rafael Chávez Frías started appropriated earnings from PDVSA to finance the economy. A drastic fall in crude oil prices since mid-2014, touching a six-year low in early 2015, has been a major hurdle for countries such as Venezuela, where crude oil exports account for more than 90% of the country’s total exports.
“There are some discussions. But we have not reached a stage where an announcement could be made,” a director on the board of OVL told FE.
The Narendra Modi-led government is trying to ensure energy security to meet the increasing demand at home by pushing oil diplomacy. So far, OVL has made investments to the tune of $400 million in the San Cristobal project.
Reuters had reported that ONGC Videsh and PDVSA are seeking around $1 billion in credit to stem an output decline at their San Cristobal joint venture. The sides have negotiated for more than a year and are close to a deal to overhaul wells, machinery and other items over three to four years to shore up output and change the terms of sales.
Crude would be sold to a handful of buyers, likely Indian and Asian, under a 10-year agreement, the report said.