Imperial Energy, the Russia- focused oil firm that India's Oil and Natural Gas Corp (ONGC) acquired recently, is likely to post its maiden cash profits next fiscal as it ramps up output.
Imperial had in calendar year 2007 posted cash losses of $40 million which in 2008 rose to $100 million.
"We hope to cut cash losses to $15-20 million in 2009 and will see cash profits in 2010," a company official said.
ONGC Videsh Ltd, the overseas arm of the state-run firm, is currently in the process of consolidating operations.
"When we took over (Imperial in January 2009), oil production had fallen to below 6,000 barrels per day. We were able to restore it to about 8,200 bpd by May and have now ramped it up to 11,200 bpd," he said. "We are targeting 16,000 bpd by the year end and 25,000 bpd by end of 2010," he added.
When OVL took over the management of Imperial from its British owners, it faced a virtual revolt with senior personnel threatening to quit. OVL Managing Director R S Butola rushed to this sleepy town in Western Siberia which is the headquarter of Imperial to firefight. In a very short span, Imperial's entire operations were mapped, 15 personnel key identified and they were convinced to stay put.
Today, OVL is firmly in command with operations being headed by Ashok Verma, who had in his previous stint handled an equally difficult Assam fields of ONGC.
In Imperial, OVL faces extreme climate and terrain challenges with temperatures ranging from 40 degree Celsius to minus 40 degree Celsius and fields located as far as 600 km from Tomsk town in isolated swamps and deep forests that have no rail or road links.
The area is frozen in winters and flooded in summers and is infested with all kinds of insects, some very poisonous.
The official said ONGC has posted some of its best officers to manage operations of Imperial after delisting it from London Stock Exchange and winding up its London office.
"We have a small office in Moscow and ofcourse the headquarter continues in Tomsk. We have a total staff strength of 865," he said.
As a confidence building measure, India's Petroleum Minister Murli Deora visited the Imperial Energy headquarters here. Besides meeting top executives of the company, he also met Tomsk Governor Viktor Kress to underline Indian firm's commitment to Imperial.
The official said though production has not matched the previously set targets by the British owners of Imperial, the oil reserves in the fields have gone up to 946 million barrels from 920 million barrels when OVL had bid for the company in August 2008.
Imperial assets hold a large potential upside for OVL, which the company plans to tap going forward.
OVL, which acquired the London-listed Imperial Energy for $2.1 billion, had initially planned an investment of an additional $1.5 billion in raising output to 35,000 bpd by the end of 2010 but has deferred it for doing more analytical studies about the field reservoir.
It is investing $209.6 million in developing the fields in 2009 and an additional $46.39 million on exploration.
OVL has cut capital expenditure at Imperial this year. "Right now we are in the process of consolidating operations. The company will conduct field studies and do preparatory work for ramping up output in 2010," the official said.
Crude oil prices had dropped below $40 a barrel when OVL took over Imperial in January this year from $142 a barrel when the Indian firm had made the bid for Imperial in August, de-incentivising major capital expenditure. Oil prices have since risen to $70 a barrel.
"Production level will be lower than previously targeted," he said. "We want to conserve the resources for better oil prices (in future)."
Imperial had projected crude output to rise to 25,000 bpd (1.25 million tonnes a year) by the end of 2008 but the actual production was hovering around 7,000 bpd when it accepted OVL bid last year and later the output fell below 6,000 bpd at the time of handing over the company. The output was to increase to 35,000 bpd (1.75 million tons) by the end of 2009.
