India is now taking the diplomatic route to remove business hurdles with energy-rich Venezuela, specifically concerning ONGC Videsh (OVL) operations in the Latin American nation.
“The ministry of external affairs (MEA) may now play an active role in extricating OVL and other Indian companies from their troubles in Venezuela. The petroleum minister (Dharmendra Pradhan) clearly wants the MEA to steer a deal offered by the Venezuelan oil minister Rafael Ramirez recently to sort out the mess,” a top government source told FE.
Petroleos de Venezuela, the national oil company of Venezuela, which is reportedly facing a cash crunch is holding back dividends to OVL, the overseas arm of state-run explorer ONGC. The Indian firm has invested in two projects in Venezuela — San Cristobal and Carabobo-1.
“To placate Indian sentiments over unpaid dividends and slow progress of work in oil fields in which Indian companies have built significant stakes, Ramirez has offered another prolific block in the heavy crude oil Orinico belt to an Indian consortium on nomination basis. Notably, RIL has already taken the lead in engaging with the Venezuelan side for entry in the new block,” said the government official.
The Venezuelan oil minister is also showing a willingness to put in place a mechanism wherein part of the proceeds for payment of crude exported from Venezuela to India could be maintained in Indian rupees, which, in turn, could be used to pay for exports from India to Venezuela, he added.
However, the Indian firms are scared of engaging with Venezuelan authorities as promises made before have not been fulfilled. They now need the MEA help to sort the snags out, says industry watchers.
On September 3, 2013, PMS Prasad, executive director of RIL, had said: “We are looking at two things in Venezuela. One, we have a long-term crude oil supply contract and enhancing the quantities under this contract, possibly from next year. We are also looking at investing in Venezuela. They have given us 2-3 opportunities for us to evaluate.”
In the San Cristobal project, OVL’s share of oil production was 0.767 million tonnes in FY14 and current production is around 31000 bopd.
OVL’s share of investment stands at about $193.13 million till March, 31 2014 in the project. The Indian explorer has 40% stake in the project.
On the other hand, Carabobo-1 project is producing about 7500 barrel of oil per day from 11 development wells. OVL holds 11% participating interest in Carabobo-1 project.