OVL Mittal lines up $2 bn for Nigerian oil blocks

Company has paid around $125 mn as a signature bonus for the two Nigerian blocks.

OVL Mittal Energy Ltd may invest between $1.5 billion and $2 billion in the development of two off-shore deep-water blocks that it had bagged in Nigeria this May.

The company plans to start production by 2010, and is currently working on an exploration plan for prospecting the blocks. The blocks are estimated to yield 6.5 lakh barrels of crude oil per day.

"The development plans for the Nigerian blocks are being prepared along with OVL Mittal. We hope to begin production within three to four years," RS Sharma, chairman and managing director, ONGC said.

The company had paid around $125 million as a signature bonus for the two blocks in Nigeria.

Once oil is discovered, the joint venture will have to enter into a production-sharing contract with the Nigerian government.

OVL Mittal is also setting up a 15-million-tonne (MT) refinery on a build-operate-transfer basis in Nigeria.

In the event of the blocks not yielding any oil, the Nigerian government will supply crude oil to the refinery at prevailing international prices.

OVL officials said the investments would be in tune with the actual discoveries made in the blocks. "The investments will be massive, and can be increased if required," they added.

OVL Mittal Energy Ltd is a joint venture between ONGC Videsh Ltd and the Mittal group, which was formed in 2005.

While SBI Caps has a 2 per cent stake in the JV, OVL holds a 51 per cent stake in the remaining 98 per cent, with the leftover 49 per cent of the 98 per cent stake lying with Mittal Investment Sarl.