OVL declines Venezuela’s offer for additional stake in oilfield
ONGC Videsh Ltd, the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), has rejected Venezuela’s offer for additional stake in an oilfield as it fears the Latin American nation may use it as an excuse to not pay USD 449 million of past dues, a top official said. State oil firm Petroleos de Venezuela SA (PDVSA) had last year offered a 9 per cent stake in the San Cristobal field to OVL. OVL already holds a 40 per cent stake in the field, which produces around 18,000 barrels of oil per day (bpd). “Cash-strapped PDVSA hasn’t been able to pay our dues and the additional stake may be used to settle the dues. We don’t think that is what we want. We want our dues to be cleared first,” the official, who wished not to be identified, said. OVL, he said, has declined the offer for an additional stake. The official said Venezuela has not paid OVL USD 449 million (about Rs 3,200 crore) of accrued dividend for four years. This dividend pertains to the San Cristobal field, where PDVSA holds the remaining 60 per cent stake. Venezuela, he said, had in November 2016 agreed to pay USD 537.63 million of dividend due for 2009 to 2013, in installments. In lieu, OVL agreed to help PDVSA arrange USD 318 million financing for the San Cristobal project. “Though we received a dividend of USD 56.22 million for 2008, dividends for 2009 to 2013 totalling USD 537.63 million remained unpaid. The dividend for 2014 and onwards is yet to be declared by the shareholders,” it said. OVL and PDVSA through their relevant subsidiaries signed two definitive agreements for facilitating redevelopment of the San Cristobal joint venture project in Venezuela on November 4, 2016. “The agreements provide for a mechanism to liquidate OVL’s outstanding dividends from the San Cristobal project (USD 537.63 million). So far PDVSA has paid USD 88.42 million in accordance with the dividend payment agreement signed in November 2016. The balance dividend to be paid is about USD 449 million,” he said. The official said OVL has been pursuing the issue at various levels including with the Petroleum Minister of Venezuela as well as various echelons of PDVSA. In April, the Latin American nation assured commencement of dividend payment shortly. OVL had received its dividend from the sale of crude oil produced from the field totalling USD 56.224 million for 2008. But dividends for 2009 to 2013 totalling USD 537.631 million remained unpaid due to cash flow difficulties being faced by PDVSA. No dividend was declared thereafter. After the November 2016 agreements, OVL received three instalments totalling USD 88.42 million between December 2016 and March 2017, but subsequent ones have been stopped. In the November 2016 agreement, PDVSA had agreed to supply 17,000 barrels per day of crude oil to repay USD 537 million that it owed to OVL. As part of the agreement, OVL was to stand guarantee for the San Cristobal joint venture to raise USD 318 million capital required for raising production from the field to 27,000 bpd from current 18,000 bpd. OVL also owns 11 per cent of the Carabobo project in the Orinoco region of Venezuela, which is in the pre-production stage. The project was to produce 4,00,000 barrels per day of oil and involved constructing a heavy crude upgrader that could turn Orinoco’s tar-like oil into valuable synthetic crude. The agreement for Carabobo was linked to the development of the upgrader after reaching the peak but the project is now producing about 22,000 bpd only. OVL has asked PDVSA to delink the development of the upgrader with the project and give it a dividend so that some revenue could flow to it.