Fall in output from Imperial Energy may hurt ONGC overseas arm

Written by Prashant Mukherjee | New Delhi | Updated: Dec 8 2012, 07:22am hrs
ONGC Videsh (OVL), the overseas arm of Oil & Natural Gas Corporation, seems to have burnt its fingers over the acquisition of UK-listed Imperial Energy. Against a targeted output of 80,000 barrels of oil per day from the companys oilfields in Russia by 2012-13, the production has remained depressed with expectation that it will fall to 5,000-6,000 barrels from the current output of 10,000 barrels per day due to non-drilling of wells.

A fall in production was also witnessed as the company stopped investing in the block, awaiting clarity on the appropriate technology for production from the tight reservoir. There are a total of 17 fields, of this only five are main producing ones.

The output from the fields is far below what we had earlier projected. We are not able to increase production as envisaged due to various reasons. Yes, there has been a constant decline from the field, an official said, requesting anonymity.

ONGC, in its perspective plan 2030, envisaged to double its present production to around 130 million tonnes by FY30, which would require production growth of 4-5% per annum. OVL share of production contribution is targeted to 20 mt of oil by FY18 and 60 mt by FY30.

But with ageing domestic fields and non-fruitful acquisition in fields abroad, analysts feels the targets seems unachievable. Most of the analysts also cut earnings estimates with the company scaling down crude oil production estimate and paying higher subsidies to oil marketing companies.

Analysts have also raised doubts on OVLs recent acquisition of 8.4% stake of ConocoPhillipss in a Kazakhstan oilfield, as the production from the field will remain low.