Output to rise by more than 30% this year: OVL MD

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New Delhi | Published: December 10, 2015 12:50:20 AM

ONGC Videsh, the overseas arm of India's flagship explorer ONGC, expects its oil and gas production to rise by a steep 30% in the current financial year, reports Siddhartha P Saikia in New Delhi.

ONGC Videsh, the overseas arm of India’s flagship explorer ONGC, expects its oil and gas production to rise by a steep 30% in the current financial year, reports Siddhartha P Saikia in New Delhi. That’s thanks primarily to the incremental volumes from the Vankor asset acquired recently, Narendra K Verma, managing director, told FE. In FY15, OVL production went up 6% to 8.87 million tonnes of oil equivalent (mtoe) against 8.36 mtoe in FY14. In the current fiscal, it targets to cross 12 mtoe output.

In September, OVL had announced buying 15% stake in Vankorneft (which runs the Vankor oilfield in East Siberia) from Russia’s Rosneft for $1.25 billion.

Verma said OVL would get its share of hydrocarbon from the date of signing of the agreement. Currently, production is hovering around 442,000 barrels per day. OVL share would be 66,000 barrels per day. The formal deal with Rosneft is likely to be closed in 2016. The Cabinet Committee on Economic Affairs (CCEA) is expected to give its go-ahead for the acquisition shortly.

Verma said that Vankor is a developed and self-sustainable project. Simply put, the explorer would not have to put additional capital expenditure to keep the crude oil flowing. The operating cost would be funded from the revenues generated from sale of hydrocarbon.

The managing director, however, did not divulge the impact on revenues after a 30% increase in output. Since June 2014, Brent crude has plunged 65% from $115 per barrel to $40 a barrel. Even the rolling annual average price, at less than $55, has halved in just 18 months and continues to slide. Reuters quoted Goldman Sachs as reckoning that any thought of a rebound or even stabilisation in 2016 is way off the mark and that US crude could shed almost 50% from here to $20 per barrel.

Higher oil and gas output are also expected from other areas such as increase in output is because of a higher output from its assets in Azerbaijan, Myanmar and Brazil projects.

OVL had registered the highest-ever production of 9.45 mtoe in 2010-11. However, the output fell after socio-economic unrest hit production in countries such as Sudan and Syria. The explorer’s assets in South Sudan that used to produce about 45,000 barrels per day are not in full operation, while its fields in Syria where output could have ranged nearly 70,000-80,000 barrels per day are completely shut because of geopolitical turmoil.

In addition, one of its expensive acquisitions worth $2.1 billion in 2009 of Imperial Energy turned out to be the worst buy in recent times after output fell drastically to less than 7,000 barrels per day now against a forecast of 80,000 barrels per day.

In Venezuela, output from the San Cristobal field in Junin at the Orinoco region of the Latin American nation dropped. This is because the water-injection programme has not completed, which would have help in increasing the output.

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