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ONGC: Making waves abroad

The Sakhalin project in far-eastern Russia is one of OVL's successful overseas ventures.
THE ONGC Videsh Limited (OVL), a subsidiary whose primary business is to bid for oil and gas acreages abroad and produce hydrocarbons, is going places. According to R.S. Butola, Managing Director, OVL, the company contributes 8 million tonnes of oil and oil-equivalent gas, which he says, is “quite significant from the overall perspective, considering that the country’s total production is 50 million tonnes of oil and oil-equivalent gas”. He gave another piece of statistics to prove its excellent performance: “In 2003, we were in seven countries. In 2008, we are in 17 countries in 35 projects and 50 blocks.”

Butola said: “We have got some interesting blocks with us. In Nigeria, we have got some interesting prospects. We are present in Brazil, where we have taken some exploration blocks. We have taken some exploration blocks in Colombia. In Cuba, again, it is purely exploration blocks. If we are successful in Cuba, it [the discovery] can be fairly large.”

An important reason for OVL’s rapid growth is the special treatment it has received from the Government of India. In order to expedite investments abroad, investment decisions which are beyond the power of the OVL Board are considered by the Union government through an empowered committee of Secretaries. “It is really a fast-track mechanism,” said Butola. If the OVL Board makes a proposal, the committee is convened within a week. Then the proposal goes to the Union Cabinet or the Cabinet Committee on Economic Affairs for its consideration.

Another advantage was a larger number of hydrocarbon basins available to OVL for exploration. “We can go to various countries where we can get a foothold, where we can get oil and gas. That means we have a larger canvas to work on,” Butola said. But this also meant that the company had to face more competition.

OVL’s first production started in January 2003, from the Lan Tay gas field in Vietnam. In March 2003, it acquired property in Sudan. On December 2, 2006, the Russian Federation’s Ambassador to India, Vyacheslav T. Trubnikov, handed over a decanter of crude oil from the Sakhalin-I project in far-eastern Russia to Petroleum Minister Murli Deora at New Mangalore Port. It was a symbolic gesture. The previous day, the Russian vessel mv Viktor Titov had berthed at the port with the first cargo of about 7 lakh barrels of crude from Sakhalin-I. OVL had invested $2.7 billion in the project. The company’s strategy is to build a balanced portfolio with an appropriate mix of production, discovered assets and exploration assets. Today, it has six producing assets, and five assets where discoveries are awaiting appraisal. The rest are exploration projects.

“This is an optimal portfolio. However, it needs to be built. The strategy will continue to be the same.… accrete reserves through your own efforts by drilling wells and acquiring from the market, from wherever you can.” From its position as a non-operator, OVL today is an operator in 16 projects and joint operator in three projects.

About OVL’s participation in Sakhalin-III block, Butola pointed out that it had not been auctioned yet. As per the new Russian sub-soil law, since Sakhalin-III was a block of significant size, the Russian national oil companies would have more than 50 per cent share. “We have good relations with both Rosneft and Gazprom, the two Russian national oil companies, and we have been talking to them about the possibilities of working together in Sakhalin-III. The governments of India and Russia have indicated their support for this idea,” Butola said.

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