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ONGC VIDESH LIMITED - IBEF · ONGC Videsh Limited (OVL),a wholly owned ... (ONGC),was incorporated in 1965 as Hydrocarbons India Private Limited.It became a deemed public company

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Page 1: ONGC VIDESH LIMITED - IBEF · ONGC Videsh Limited (OVL),a wholly owned ... (ONGC),was incorporated in 1965 as Hydrocarbons India Private Limited.It became a deemed public company

OVL produced a total of 6.62 MMT of O+OEG

in 2005-06, up from 5.06 MMT produced in the

previous year.The company earned a consolidated

total income of US$ 1.84 billion in the financial

year ending 31 March 2006 (FY06), compared to

US$ 1.38 billion in the previous year.

The consolidated profit after tax stood at

US$ 202.6 million in FY06.

OVL in the Arab World

In the Arab world, OVL is present in Iraq, Syria,

Qatar, Libya, Sudan, Egypt and Saudi Arabia.

OVL in Sudan

OVL's investment in Sudan is the largest by an

Indian company - around US$ 2 billion - this is not

only providing the company with a source of crude

oil but is also bolstering its revenues.

In 2005, OVL successfully completed a 12-inch,

741 km multi product pipeline system, with a

contract price of US$ 194 million.The pipeline

is designed to transport motor spirit, gas oil and

white products such as kerosene and fuel oil.

The project system included construction of the

main line, piping works for six pumping stations,

10 block valve stations, laying of fibre optic cable

for voice and data transfer and integrating SCADA

and telecom systems for data management and

communication.The company completed this

project two months prior to schedule, thereby

setting a benchmark in international project

implementation.

Company Background

ONGC Videsh Limited (OVL), a wholly owned

subsidiary of the Oil and Natural Gas Corporation

(ONGC), was incorporated in 1965 as

Hydrocarbons India Private Limited. It became a

deemed public company in 1975 and was renamed

as OVL. It carries out exploration and production

of oil and gas overseas. It acquires oil and gas fields

in foreign nations, and explores, produces,

transports and exports oil and gas as an

international petroleum company.

OVL is the second largest Indian company in

terms of oil and gas reserve holdings. In 2002-03,

it became the first Indian company to produce oil

and gas outside India. It is the Indian Nodal Agency

for overseas petroleum business and is a

permanent participant in all concerned bilateral

interactions and joint working groups of the

Government of India. Currently, OVL is

participating in 25 oil and gas projects, spanning

15 countries - Vietnam, Sudan, Russia, Iraq, Iran,

Myanmar, Libya, Cuba, Brazil, Nigeria JDA, Egypt,

Qatar, Nigeria, Columbia and Syria.As a major

international player, OVL acquired interests in

9 foreign oil and gas projects during 2005-06.

ONGC Nile Ganga B.V. (ONGBV) is a wholly

owned subsidiary of OVL, with principal office in

the Netherlands. OVL has also set up a JV company

with Mittal Investments to leverage the strengths

of this global steel giant, to strengthen its position

on the international oil and gas assets.

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ONGC VIDESHLIMITED

Page 2: ONGC VIDESH LIMITED - IBEF · ONGC Videsh Limited (OVL),a wholly owned ... (ONGC),was incorporated in 1965 as Hydrocarbons India Private Limited.It became a deemed public company

OVL in Syria

Block 24

In 2004, a consortium of OVL (60 per cent) and

IPR International Limited (40 per cent) was

awarded the exploration rights in Block 24 by

the Syrian Ministry of Petroleum and Mineral

Resources.The contract provided for a three-

phased exploration period of seven years, with

IPR being the operator in the block.

Al-Furat

In 2006, ONGBV and Furlin Investments S.A.R.L.

(a subsidiary of China National Petroleum

Company International) jointly acquired entire

shares of Petro-Canada's interest in four

production sharing contracts, covering 36 major oil

producing fields in Syria.A new company, Himalaya

Energy (Syria) B.V., was formed for this acquisition,

with ONGBV and Furlin Investments holding

50 per cent stake each.

OVL in Egypt

In August 2005, a consortium of OVL and IPR

acquired North Ramadan Block No. 6, which

covers 290 square kilometres in the central part

of the Gulf of Suez province. OVL has a 70-per

cent share in the block. In the exploration phase,

IPR will be the operator, while during the

development phase, both OVL and IPR would be

joint operators.The first exploration phase of the

block is of 36 months, while the other two are

of 24 months each. OVL commits to invest

US$ 15.5 million in the block.

OVL in Libya

OVL is present in Libya in the form of a 49:51 JV

with the Turkish Petroleum Overseas Company

(TPOC), a subsidiary of the National Oil Company

of Turkey.This JV is for exploration Blocks NC-188

and NC-189, which together cover 8,646 square

kilometres. OVL has invested US$ 30 million in

the exploration programme.TPOC acts as the

operator in the blocks.

In March 2003, OVL acquired a 25-per cent

interest in the Greater Nile Oil Project for

US$ 669 million.This project is an onshore crude

oil production area, comprising five blocks that

cover nearly 50,000 square kilometers in the

Muglad Basin in southern Sudan. OVL's partners

in this project are China National Petroleum

Company (40 per cent interest), Petronas Carigali

Overseas Sdn Berhad (30 per cent interest) and

the Sudan National Oil Company (5 per cent

interest). Currently, this project supplies around

3 million tonnes per annum of crude oil to India.

This represents the first instance of an Indian

company importing crude for refining from an

overseas establishment in which it holds an equity

stake.

OVL has also acquired stakes in following two

exploration blocks in Sudan from OMV of Austria:

• Block 5A - OVL holds a 26.125-per cent stake,

while Petronas, Malaysia and Sudapet, Sudan hold

68.875 per cent and 5 per cent stakes

respectively.

• Block 5B - OVL holds a 24.5-per cent stake,

while Lundin Oil, Sweden; Petronas, Malaysia; and

Sudapet, Sudan hold 24.5, 41 and 10 per cent

stake respectively.

OVL in Iraq

In May 2001, OVL signed a contract with the Oil

Exploration Company of the Ministry of Oil, Iraq,

making OVL the sole licensee for the on-land

exploration Block-8 in Iraq.The company incurred

an expenditure of US$ 15 million in the first phase

of exploration, with the total development cost for

the project estimated at US$ 250 million. Phase

1 of the contract, scheduled over a period of three

years, includes reprocessing and interpretation of

existing 2-D seismic data, acquisition, processing

and interpretation of 1000 line kilometres of 2D

and 300 sq km of 3D seismic survey, and drilling

of two wildcat wells.

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Page 3: ONGC VIDESH LIMITED - IBEF · ONGC Videsh Limited (OVL),a wholly owned ... (ONGC),was incorporated in 1965 as Hydrocarbons India Private Limited.It became a deemed public company

operations in Australia, Egypt, Iraq, Iran, the Ivory

Coast, Libya, Myanmar Sudan, Saudi Arabia and

Syria.

Post-war Scenario in Arabic Countries

OVL was able to bid for various oil and gas

exploration contracts in the Arab countries,

including a large number of pre-Gulf War contracts

that had been cancelled subsequent to the war.

The opportunity created by the re-bidding process

for these contracts allowed OVL to expand its

operations in the Arabic region.

Future Plans

Inorganic Growth

In the past few years, OVL has grown its

operations in the Arab countries by entering into

mergers, JVs and strategic acquisitions.The

company plans to continue with the similar strategy

and therefore targets several E&P opportunities.

It plans to acquire oil and gas producing assets in

select countries in Africa, Middle East, Central Asia

and South East Asia. OVL is considering

opportunities in the oil and gas rich geographies,

including the Middle East.

In December 2005, OVL has been awarded

exploration Block 81-1 located in onshore

Ghadames Basin of Libya.The company is required

to complete acquisition of 500 km of 2D seismic

data, 500 sq. km. of 3D seismic data, and drilling of

one exploration well over an exploration phase of

five years. OVL is operator holding complete

participating interest in the block. OVL has set up

a branch office at Tripoli and posted a senior officer

as Country Manager in Libya.

OVL in Qatar

In March 2005, OVL and IPR Red Sea - in a

70:30 JV - signed an Appraisal, Development and

Production Sharing Agreement with the

Government of Qatar for appraisal of the Najwat

Najem Oil Structure.The project involves technical

studies, seismic reprocessing and drilling wells,

with a total duration of 20 years.

OVL in Saudi Arabia

In 2003, ONGC and Indian Oil Corporation (IOC)

entered into a JV for acquiring stakes in the South

Ghawar and Red Sea gas fields in Saudi Arabia. OVL

held a majority stake in the consortium bidding for

gas field development, while IOC was also bidding

for associated petrochemical and power projects.

Factors for Success

Government Support

OVL has always received strong support from the

Government of India, which in January 2000

granted the company exclusive empowerment vide

Office Order No. DPE ii (32)/96-Fin.This allowed

OVL single window clearance for overseas

upstream projects irrespective of investments

involved.

International Expertise

OVL has international expertise in the field of oil

and gas exploration.The company has its major48