ONGC Videsh Limited starts delivering gas from its offshore project in Vietnam and expects increased revenue flow from its investments in other countries.
IN its quest for equity oil and gas abroad, ONGC Videsh Limited (OVL) has, since December 18, 2000, started delivering gas from its offshore project in Vietnam to power utilities inland. The partners in this massive project are OVL, PetroVietnam and British Petroleum. The gas will be used to generate 40 per cent of Vietnam's electricity needs. The exploration efforts of OVL, along with British Petroleum and PetroVietnam, in South China Sea in 1992 and 1993, led to the discovery of the Lan Do and Lan Tay gas fields. The project, which has reserves of around 58 billion cubic metres, will yield about three billion cubic metres of gas a year.
Atul Chandra, Managing Director, OVL, told Frontline that the supply of gas from offshore fields to power utilities was a major achievement. The Vietnamese government had declared it as a project of national importance. A 370-km long submarine pipeline takes the gas to the terminal at Phu My, where it is processed to meet the requirements of the national power company of Vietnam. Atul Chandra said, "We will start getting revenues. It is time to get the returns" on the Rs.980-crore investment made by OVL. "We will have net cash flow of $40 million. It may be $60 million per annum in a year or two," he added.
True to its charter, OVL is going places. It has dug in at Sakhalin in Russia, Iraq, Iran, Myanmar, Sudan and the United States. OVL has a 20 per cent holding in the Sakhalin-I project in Russia, investing $1.7 billion. This is the single largest foreign investment made by any Indian corporate. Atul Chandra said: "We will start production of oil from Sakhalin in 2005. Gas production will begin in 2008. It will yield 2.5 lakh barrels of oil a day or 12.5 million tonnes a year. In the first six to seven years, 40 per cent of this production will be ours... So our share will be about five million tonnes in the first six to seven years. After that, it goes down to 2.5 million tonnes. That will go on for a long time."
On December 26, a consortium of OVL, Indian Oil Corporation (IOC) and Oil India Limited (OIL) signed a contract with the National Iranian Oil Corporation for exploration of Farsi offshore block in the Persian Gulf. This marked the first step in India's involvment for exploration of hydrocarbons in Iran. While OVL and IOC have 40 per cent equity each in the project, OIL has 20 per cent.
Subir Raha, Chairman and Managing Director, ONGC, told Frontline that his company was doing a study on whether it was better to bring the crude oil from Sakhalin to India or do swaps. ONGC had engaged PricewaterhouseCoopers as a consultant to study this. "They have made an interim presentation. We have asked for more details," he said.
Sakhalin group of islands, which lie just north of Japan, gets ice-bound during winter. The crude has to be brought from Sakhalin to an all-weather port. "From there, we can sell it to nearby countries such as Japan or China, or bring it to India, or swap it. We are looking at the economics," Raha added.
OVL was set up to augment ONGC's production of hydrocarbons by sourcing equity oil and gas from abroad. Hydrocarbons India Private Ltd was incorporated in March 1965 as an ONGC subsidiary. It became a public limited company on April 1, 1975 and was renamed ONGC Videsh Limited on June 15, 1989.
According to the Report of the Group on India Hydrocarbon Vision 2025, India's hydrocarbon requirements will be about 368 million tonnes by 2025. Indigenous production of crude by then will only be 80 million tonnes. The estimated shortfall will be in the order of about 300 million tonnes a year by 2025. According to Atul Chandra, the demand today was about 108 million tonnes of crude oil but the country produced only 32 million tonnes only 30 per cent of the demand. The balance was imported. At the current rate of production, it ought to be producing at least 110 million tonnes a year by 2025. Chandra added: "Our mission is to get 60 million tonnes of oil a year by 2025 from abroad as equity oil."
OVL considered Russia, Vietnam, Iraq, Iran, Libya, Indonesia, Venezuela, Kazhakstan, Myanmar and some African countries as possible sources. Atul Chandra said: "If we can integrate our upstream and downstream industries, we can leverage our buying power. For this reason, in some of the projects abroad, we are working as partners.''
Vietnam is OVL's first partner country. On May 19, 1988, it signed a petroleum sharing contract with PetroVietnam for three blocks 06, 12E and 19 in Nam Con Son basin, about 370 km offshore of Vietnam. OVL started seismic surveys in the same year and acquired 6,000-line km of seismic data in the three blocks. Analysis of the data showed that Block 19 had no potential and so the OVL relinquished it. The first exploratory well was spudded in Block 06 in the Lan Do structure on April 11, 1991. But there was an uncontrolled kick, making it impossible to extract gas. Drilling of the second well began on December 13, 1992 and there was a show of gas. The gas reserves in the basin are estimated at 2.04 trillion cubic feet.
According to ONGC officials, while OVL's involvement was limited to the upstream project, British Petroleum, as the operator of the project, will build the facilities needed to process the gas and sell it.
OVL signed a memorandum of understanding with PIDC (PetroVietnam Investment & Development Company), a wholly owned subsidiary of PetroVietnam on January 9, 2001, at a function in Hanoi in the presence of Prime Minister Atal Behari Vajpayee. The MOU provides for collaboration between OVL and PIDC in the exploration and production of hydrocarbons in Vietnam, India and other countries.
Atul Chandra said: "On November 26, we celebrated the start of gas production. It is a very important day for us and for all our partners." The production platform and the pipeline, to bring the gas to the terminal onland, were ready then itself. "The gas is already in the system. It will start moving to the consumers in some days and my revenue will begin to flow in," he said.
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