ONGC Videsh Limited (OVL)’s woes in Sudan are far from over. The company is now seeking a relaxation in the transit fee on transporting the crude oil produced in South Sudan out of the country, through the North. Sudan has formed a committee to negotiate a transportation agreement for foreign companies operating in South Sudan.
Today, India’s request for a cut in the transit fee was discussed at a meeting between Petroleum Minister Jaipal Reddy and his Sudanese counterpart Awad Ahmed El Jazz. El Jazz told Reddy Sudan had constituted a committee to arrive at an agreement for China National Petroleum Corporation (CNPC), Malaysia’s Petronas and OVL, said a senior Indian government official, on the condition of anonymity.
The Greater Nile Oil Project, in which OVL, through its subsidiary ONGC Nile Ganga BV, holds 25 per cent stake, produces about 85,000 barrels a day of oil. CNPC holds 40 per cent participating interest in the project, Petronas Carigali Overseas Sdn Berhad, a subsidiary of Malaysian Petronas holds 30 per cent, and Sudapet, the national oil company of Sudan, holds the remaining five per cent stake.
While most production is accounted for by the landlocked South Sudan, infrastructure like pipeline and processing facilities lie in the north. The government official said it was proposed $11/barrel would be charged as transportation, processing and transit fee from OVL. “We are in discussions with them to bring down the transit fee component being charged,” said the official. OVL’s margins through sale of crude oil would be squeezed in case the transportation and transit costs are high.
Sudan is the chief contributor of crude oil to OVL’s overall production. Political problems in Sudan and Syria had led to OVL’s crude oil production falling eight per cent to 6.2 million tonnes in 2011-12. “We are hoping to resume production from South Sudan soon and are waiting to sign the agreement,” the official said.
Crude oil production from OVL’s facility in Sudan had fallen by about half to 60,000 barrels a day. After the secession of South Sudan on July 9, 2011, blocks 1,2 and 4 have been straddled between the two countries, and Block 5A now comes under South Sudan.
“The company’s operations in South Sudan have been temporarily shut from January 23, because of the lack of an agreement on processing, transportation and port facilities in Sudan for crude oil produced in South Sudan. The company’s production in Sudan was also adversely impacted in April due to partial damage to the processing facility in Sudan. Production was partially restored in Sudan from May 1,” OVL, the foreign arm of Oil and Natural Gas Corporation, had said in a press release after its annual results for 2011-12 in May.