ONGC upbeat on Sudan acquisitions

Oil and Natural Gas Corporation Ltd (ONGC) is upbeat about the performance of its Sudan acquisitions and expects that value of all the three assets there including the Greater Nile oilfield, in which ONGC Videsh (OVL), its overseas arm has taken stake, will be enhanced steadily in course of time.

ONGC is also optimistic about crude output from its Greater Nile oilfield going up in the next few months by 25 per cent which will help ONGC Videsh to breakeven on its investment of about $699 million.

"We are very much upbeat about all the three oilfields in Sudan. The Cabinet recently cleared the third property and all the assets have started commercial production already which so far has remained at par with our expectations. With this development, we strongly hope that assets in Sudan will boost the financials of ONGC Videsh," Subir Raha, chairman and managing director of ONGC and also the chairman of ONGC Videsh, told Business Standard during his recent visit to Ahmedabad.

ONGC Videsh has a 25 per cent stake in the Greater Nile oilfield and also has substantial stakes in the two other oil exploration blocks in Sudan.

Raha also said that the crude output from Greater Nile oilfield will go up substantially from its existing production of 12 million tonne per annum while sources in ONGC Videsh said that the crude output is expected to rise upto 15-16 million tonne per annum in the next few months.

However, Raha didn't disclose any such time frame for crude output going up from this oilfield. The Greater Nile oilfield is being considered as a very good prospect for ONGC Videsh.

The company acquired Talisman Energy Plc's 25 per cent stake in the 260,000 barrels a day Greater Nile oilfield and following this acquisition, ONGC Videsh also picked up 25 per cent shares in Block 5A and Block 5B for $136 million.

It may be added here that on January 20, the Cabinet Committee on Economic Affairs (CCEA) cleared the proposal of ONGC Videsh acquiring 11 per cent stake in the third asset with a reserve of 744 million barrel for $125.4 million.

However, following ONGC's quick acquisitions in Sudan, CCEA later decided that the total exposure of ONGC Videsh in Sudan would not go beyond $1 billion.

"With the expected increase in crude output from the Greater Nile oilfield, ONGC Videsh is expecting to meet the breakeven of its huge investment of $699 million in the next two to three years while the company is also optimistic about two other blocks. But with the commercial production of the third block just initiated, it will be difficult to comment on the breakeven period for ONGC Videsh for these two blocks for which another five to six months of time may be required," said a source.