ONGC, PDVSA to raise $1bn for Venezuela JV
India’s Oil and Natural Gas Corp (ONGC) and Venezuela’s state oil company PDVSA are seeking around $1bn in credit to stem an output decline at their San Cristobal joint venture, two sources close to the negotiations said.
Indian banks are poised to lend the money to the joint venture, the sources said, though ONGC would provide the guarantee and the breakdown of the loan’s repayment has not yet been decided. The deal is expected to ensure state-owned ONGC receives between $400m and $500m of unpaid dividends that have accrued over five years.
“This could come together next year,” one of the sources said of the deal, which seeks to stem San Cristobal’s production fall from a peak of over 40,000 barrels per day to around 30,000 bpd.
It is also likely to involve creation of an offshore account, probably in Asia, to receive the export income, guaranteeing ONGC will receive money. With oil prices tumbling, the likely deal underscores a broader shift toward pragmatism in financially-strapped PDVSA under new boss Eulogio Del Pino.
The sides have negotiated for more than a year and are close to a deal to overhaul wells, machinery and other items over three to four years to shore up output and change the terms of sales. Crude would be sold to a handful of buyers, likely Indian and Asian, under 10-year agreements, one source said.
The offshore account “will be a like a waterfall mechanism, whereby the revenue from the project … will then be distributed among partners,” said the second source.
Venezuela awarded ONGC its stake in the field in 2008. Under the venture’s original terms, India’s largest oil and gas explorer is due to receive dividends, though it does not control the crude’s marketing or receive revenue from sales. Both sources declined to be identified because of sensitivity of the issue.
ONGC Videsh Managing Director N K. Verma declined to comment. PDVSA did not respond to a request for comment.