The Daily Journal — ONGC Videsh Ltd. (OVL), the overseas arm of India’s state-owned Oil and Natural Gas Corporation, is developing a strategic plan to resume its crude oil production activities in Venezuela. The company continues to move forward with the initiative even though the Venezuelan State still owes more than $900 million in overdue dividend payments, energy-sector executives told The Economic Times.
OVL’s plans in Venezuela include reviving two major onshore assets that operated below capacity in recent years because of financial sanctions imposed by the United States government.
The first project involves the San Cristóbal field, located in the Orinoco Belt in eastern Venezuela. OVL acquired a 40% stake in the field in April 2008, while state-owned Petróleos de Venezuela (Pdvsa) retained the remaining 60%.
The second asset is the Petrocarabobo field, also located in the eastern Orinoco region. In this block, OVL and the Spanish multinational Repsol each hold an 11% stake. IndianOil and Oil India each own 3.5%, while Pdvsa remains the majority shareholder with 71% of the rights.
Sources consulted by the Indian newspaper said that the operational and legal stability resulting from Venezuela’s new political and institutional framework has changed the outlook for foreign corporations.
“Economic conditions in Venezuela are now favorable for operations, so all field operators are returning, and OVL is also reassessing the situation,”
a senior industry executive told The Economic Times. The executive added that the new legal framework will provide
“freedom to repatriate profits and restore oil and gas production rights.”
Since Nicolás Maduro left power in January of this year, authorities have introduced significant changes to the legal framework governing Venezuela’s oil industry. The United States currently oversees the external commercialization of Venezuelan crude.
“Venezuela’s revised regulations require companies to channel investments through entities incorporated in the United States. Since OVL already maintains an office in the United States, that could help the company meet those requirements,”
the corporate source explained.
The executive added that this move represents an important step for India’s economy because it will
“strengthen energy security by diversifying supply sources beyond West Asia and Russia.”
According to data published by Reuters, India imported 427,000 barrels per day (bpd) of Venezuelan crude in May, reaching the highest level recorded in recent months.
Investment takes priority over frozen dividends
Despite the optimistic outlook for operations, OVL does not expect to collect the $900 million in retained dividends anytime soon.
“Executives said that Venezuela is asking companies to prioritize investment and production growth before seeking the immediate repatriation of dividends, arguing that restoring output is essential to rebuilding the sector,”
the specialized publication reported.
OVL has already begun technical evaluations at its production fields to determine the actual condition of surface facilities.
“While San Cristóbal appears to be in an advanced planning stage, discussions with partners regarding the second asset continue,”
The Economic Times reported.
The Indian state-owned company is expected to submit its formal reactivation proposals in the coming months. However, executives cautioned that timelines could change because of the country’s uncertain operating environment.
With information from The Economic Times.
