ONGC Seeks Political Risk Cover For 2nd Phase Of Sudan Investment

New Delhi, April 27 | Updated: Apr 28 2004, 05:30am hrs
Oil and Natural Gas Corporation (ONGC) has decided to take political risk insurance for its second phase of investment of $750 million in Sudan. ONGC refused to share any numbers. But information provided to the petroleum ministry indicates that ECGC has agreed to provide insurance cover for the installments falling during the first two years, which is estimated to be around $60 million. The premium rate offered is 5.43 per cent (Rs 5.43 per Rs 100) for covering the transactions against political risk.

ONGC will execute the Port Sudan pipeline and refinery expansion as part of this project. This will be the next biggest investment by ONGC after the recently concluded $600 million deal for buying Royal Dutch Shells equity in the Angola deepwater exploration block 18 in West Africa.

Sources said the finance ministry has asked ONGC to compare the cost of insurance cover offered by ECGC with that of international ones. The ministry has argued that the peace process is progressing in Sudan and this should reflect appropriately by way of reduction in re-insurance costs.

Addressing the concerns over security and technical risks associated for executing these two projects, ONGC has informed the government that the peace process in Sudan has made significant progress in recent months. Quoting the inputs from the external affairs ministry, ONGC has informed that though peace talks will take time and are unlikely to conclude immediately, overall outlook reflects optimism as the US interlocutors are keen to ensure that the peace agreement is signed as soon as possible. It is also expected that US sanctions against Sudan may be lifted in near future.

Sources said that it has also been pointed out by the finance ministry that as bulk of OVLs investments are in Russia and Sudan and the fact that with possible cost escalations in Russia, OVLs risk is not equitably disbursed, it is important for OVL to balance its risk equitably in Sudan. Towards this, OVL has been asked to restrict its exposure in Sudan to $1 billion.

ONGC has also been told by the petroleum ministry that it should involve other Indian and foreign players to to broad base its risks in both these projects. Sources said that OVL has initiated talks with Indian Oil, Oil India and Engineers India Ltd for forming a consortium to execute the two projects.

OVL has already invested close to $650 million in March 2003 to acquire a 25 per cent participating interest in the Greater Nile Oil Project (GNOP) in Sudan. GNOP is a producing field with annual oil production of about 13 mtpa. The next phase of investments by ONGC in Sudan is for implementing the pipeline and refinery project, which were offered as a package to it on nomination basis by Sudan.