RIL goes back to ONGC for Venezuelan oil block
After the $14.5-billion LyondellBasell takeover deal turned sour, Reliance Industries (RIL) has renewed talks with the ONGC-led consortium to pick up a stake in the Carabobo-1 oil block in Venezuela, a consortium member told ET.
RIL had approached ONGC to pick up about 20% stake in the field last year but later lost interest due to its preoccupation with proposed LyondellBasell acquisition. “It is very difficult to include RIL in the consortium at this stage... and if so, it may have to pay huge premium,” the person said requesting anonymity. RIL didn’t respond to ET’s queries.
The field, stated to have about 50 billion barrels of proven oil reserves, is important for RIL as it buys crude oil from Venezuela for its over 62 million tonne per annum capacity refineries in Jamnagar. The complex refineries of RIL are suitable to process relatively cheap Venezuelan crude, giving them higher margins.
Venezuela awarded the $19-billion project to the ONGC-consortium last month. Other members of the consortium are Indian Oil Corp (IOC), Oil India (OIL), Repsol YPF of Spain and Petroliam Nasional Bdh of Malaysia. ONGC holds an 11% stake in the field while other two state-owned oil firms IOC and OIL have 3.5% stake each. Repsol and Petroliam Nasional Bdh have 11% interest each in the project.
Balance 60% stake is held by PdVSA, the national oil company of Venezuela. State-owned ONGC was confident of getting a 40% stake in one of the three multi-billion dollar Carabobo oil fields after a meeting between Venezuelan president Mr Hugo Chávez and petroleum minister Murli Deora in 2008.
Initially, ONGC and RIL together wanted to pick up 20% stake each in the project. But they also kept an option open to include IOC and OIL as minority partners by diluting their interests proportionately. Later, when RIL decided against the partnership, ONGC roped in Repsol and Petroliam Nasional Bdh, an official in petroleum ministry said requesting anonymity. The ministry controls affairs of state-owned oil companies such as ONGC, OIL and IOC.
On Friday last week, the Cabinet Committee on Economic Affairs (CCEA) approved state oil companies’ proposal to invest $2.181 billion in the Venezuelan oil block. “Actual initial investment could be even less (than the sanctioned amount). The project will be self sufficient after oil production starts from the field,” an ONGC Videsh official, who didn’t wish to be named, said. ONGC holds its foreign assets through its wholly-owned subsidiary ONGC Videsh (OVL).
As per estimates, Indian oil companies can bring home about 5.5 million tonne of crude oil annually when the field achieves the peak level of production. The fieldis expected to start production by 2013.