OVL, partners weigh Sudan government’s all-or-nothing offer

Siddhartha P Saikia Posted online: Thursday, Jun 12, 2014 at 0000 hrs
New Delhi : Despite the separation of South Sudan from the then unified Sudan in July 2011, a joint venture hydrocarbon project between state-run oil companies of India, China and Malaysia traversing both countries seems safe and won’t be reconfigured much, given a package deal offered to the consortium by the Sudanese government.

Sources said the Sudanese government has told consortium Greater Nile Oil Project (GNOP) it can retain the promised stake in a crude oil pipeline from Heglig near the Sudan-South Sudan border to Port Sudan on the Red Sea. Moreover, Sudan has promised to extend the exploration contract for one of the two oil blocks under GNOP beyond the terminal year of 2016 and to give a new contract for the other block.

“The government of Sudan would take over the ownership of the pipeline (run by a joint operating company, Greater Nile Petroleum Operating Company, GNPOC) from October 1. However, they have offered the consortium companies including OVL (ONGC Videsh) to pick up 30% in the pipeline and operatorship as part of a package,” a senior Indian oil ministry official said. The consortium partners will soon take a call on Sudan’s offer.

India’s OVL picked up a 25% stake in GNOP in 2003. China’s CNPC and Malaysia’s Petronas and Sudan’s Sudapet are the other members of the consortium, with stakes of 40%, 30% and 5%, respectively. GNOP operates upstream assets of onshore Blocks 1, 2 and 4 in the Muglad Basin. GNOP also runs a 1,504-km, 28-inch crude oil pipeline from the oilfield in Heglig to Port Sudan through GNPOC.

“The issues relating to the package offered by Sudan including the Block 2B extension and 30% participating interest in the crude oil pipeline are under evaluation by the partners for coming out with a common position to negotiate with the government,” said another official. Sudan has put a caveat to the proposal — the package can be accepted only in totality.

For OVL, the GNOP venture is important because it is a producing asset and the potential for expansion is considered to be huge.

Recent meetings between OVL and the Sudanese government were attended by India’s ambassador to Sudan Sanjay Kumar Verma. OVL also discussed the issue of continuing to operate the pipeline with CNPC, where the partners are learnt to working towards “submitting a fair commercial offer shortly”.

However, OVL and its partners are have been stuck of over two years with outstanding dues of $210 million from the Sudanese government for oil sold earlier. After the split, Sudan’s share of total production proved insufficient to meet its local refinery requirements. Since 2011, it has been buying the foreign partners’ share of crude oil for local refinery feedstock requirements. However, Sudan has not paid for purchase of oil. OVL’s share of estimated dues from Sudan was about $ 112 million as on June 2012. Verma, the Indian ambassador in Sudan, is understood to be pursuing the issue with the local finance ministry.