In a bid to salvage the loss-making fields acquired from Imperial Energy in Russia’s Tomsk region, ONGC Videsh (OVL) is planning to create a facility at the site which will enable it to use the associated gas produced from the field to enhance crude oil production and also produce value-added products.
“Associated gas is quite prolific in the field and we plan to utilise it,” said an OVL executive requesting not to be named. Associated gas is a type of natural gas found mixed with crude oil reserves or floating above crude oil reservoirs.
According to the executive, the company is putting up the facility as flaring or burning the gas attracts fine as it affects the environment and it will help in augmenting production which is fledgling.
OVL, the overseas arm of ONGC, had in 2009 acquired the assets of the UK-listed Imperial Energy for a consideration of $2.1 billion and has invested additional $300 million to develop the assets. However, the crude oil production from the fields has been a meagre 7,000 barrels per day (bpd) compared with the initial estimates of around 80,000 bpd. The company later sought tax concessions from the Russian government on multiple occasions, however the pleas were turned down given similar tax structure was applicable to all producers in the region.
Later, a Parliamentary panel too had rapped OVL for the investment which has affected the financial position of the company. “The Committee is irked at the intransigent stand taken by OVL justifying the acquisition of Imperial Energy Corporation asset. Except reiterating its earlier reply, OVL has not offered any justification for its ill-conceived decision not to farm-out part of its stake in IEC to local Russian firms/entities and its unrealistic estimation of oil reserves and production targets,” noted a report on Joint Venture Operations of ONGC Videsh by the Standing Committee on Public Undertakings.
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According to the executive, the cost estimate of the facility is still to be frozen post which tendering process for installation will be initiated. The facility will be able to produce value-added products such as propane, among others.
For financial year 2016-17, OVL moved to black both on standalone and consolidated basis. While it registered a profit of Rs 1,749 crore last year compared with a loss of Rs 3,894 crore a year ago on standalone terms, on consolidated basis it witnessed a profit of Rs 701 crore compared with a loss of Rs 3,633 crore during the same period previous year. The change in the fortune is due to its acquisition of Vankor project which is a profit-making prolific proposition.
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