As ONGC Videsh’s (OVL) licence to explore Block 128 in the South China Sea is set to expire soon, the firm has commenced talks with the national oil company (NOC) of Vietnam, PetroVietnam, for a risk-sharing agreement to drill the hydrocarbon block. However, the company will only go ahead with exploration once oil prices recover, said a top OVL executive.
“We are talking to the NOC of Vietnam to have a share in the block and based on that we will take a call. Either we get a partner for risk sharing else we are not planning to drill immediately particularly in this oil price scenario,” said NK Verma, managing director, OVL.
The fourth extension of the exploration licence in the disputed region where China claims its sovereignty will expire in June 2017. However, a July 2016 ruling of the Permanent Court of Arbitration in The Hague said Beijing’s claims over majority of the South China Sea has no legal basis. The first production sharing contract for the block was signed in May 2006 and the Indian company has already spent around $60 million in the block despite recovering any hydrocarbon.
“We tried to drill in the past but because of some seabed failure, we could not keep the rig there and we had to move out,” said Verma. OVL first ventured into Vietnam in 1988 when it got the exploration licence for Block 6.1. However, it was only in 2006 that it got two additional blocks—127 and 128—for exploration. OVL, however,
relinquished Block 127 due to poor prospects but retained Block 128.
OVL, which has presence in various countries, such as Russia and Venezuela, is at present figuring out additional data and the due diligence is done. “We are searching for partners. Right now there is no drilling plans but definitely this is one potential where we could invest with shared risk in the future,” added Verma.
For FY17, OVL produced 12.5 MT compared with 8.9 MT in FY16, a 40% jump that is primarily on addition of Vankor fields in the portfolio. “In the current year, we are targeting 14.3 MT of production,” said Verma. Vankor was acquired in two tranches—15% and 11%. While the impact of 15% has fully come in the last year, the impact of 11% will come in this year.