OVL to concede equity to Cuban firm

ONGC Videsh Ltd (OVL) will have to concede equity to the Cuban government-owned Cubapetroleo (Cupet) in the two offshore blocks it has been offered in that country. OVL had got operating right in the two deep-water offshore blocks, but officials said a formal agreement was yet to be inked pending resolution of the equity-sharing issue.

"We are awaiting a clearance from the Cuban government which is stuck on the issue of how much stake we will offer them in the blocks," said a senior ONGC executive. The OVL could be granting up to 20 per cent equity to Cupet.

State-owned companies in Sudan and Vietnam have picked up equity in blocks in their respective territories in which the OVL is a participant. "Governments in these countries insist on such a stake," said an official.

The OVL has got 30 per cent participating interest in seven deep-water exploration blocks in Cuba. The stake was acquired from Repsol YPF which also offloaded 30 per cent equity to Norsk Hydro of Norway. The acquisition will be completed after the Cuban government formalises the contract.

The company has signed an agreement with Repsol-YPF of Spain to acquire a stake in blocks 25, 26, 27, 28, 29, 36 and part of block 35 in Cuba. Repsol-YPF holds another 40 per cent equity in these blocks. The blocks are spread over an area of nearly 12,000 sq km in an exclusive economic zone. Its hydrocarbon resource potential is estimated to be more than four billion barrels.

These blocks are in the third exploration stage. The work programme during this period includes acquisition of 3-D seismic data over 3,000 sq km. Drilling wells on selected prospects will be decided on in the next exploration phase.

China's Sinopec Corporation had earlier this year signed an agreement with Cupet to jointly produce oil on the Caribbean island. The production area was on the coast of western Pinar del Rio province and not in deep offshore Cuban waters off the Gulf of Mexico, where multinational oil companies are interested in exploring prospects for light oil.