ONGC Videsh (OVL) has sought more time from the Nigerian government to decide on takeover of two highly prospective deep-sea oil blocks in the African nation as approval for its $291 million investment decision may have to wait till General Elections are completed.
Last month, OVL sought an extension of the 60-day deadline set by Nigeria for payment of signature bonus for taking 60 per cent stake in blocks 321 and 323 as Oil Ministry declined to take its proposal to the Cabinet before new government takes over in May-end, industry sources said.
The company had in August 2005 won blocks 321 and 323, which hold inplace reserves of 2 billion barrels each, committing $485 million in signing amount. But Nigeria awarded these blocks to Korean National Oil Corp-led group claiming that the Korean firm had a first right of refusal.
The Korean group signed Production Sharing Contracts for the two blocks in January 2006 but paid only USD 92 million signature bonus, forcing Nigeria to cancel the allocation.
Sources said the Indian firm has asked Nigeria to furnish a copy of the contracts signed for the two blocks and details of the order that cancelled those contracts.
While Nigeria has announced cancellation of the Korean contract, it is yet to formally rescind the agreement and OVL wants to see it in black-and-white before making payment of $291 million for 60 per cent interest in the two blocks.
Nigerian President had in January set March 6 as the deadline for OVL to make payment of the signature bonus, sources said, adding that OVL has not specified a new timeframe for deciding on the payment.
OVL, UK-based Equator Exploration and Nigerian company Owel E&P in 2005 had made the winning offer of about $175 million signature bonus for block 321 and $310 million for 323. But KNOC exercised a right of first refusal which it had got in lieu downstream investment commitments.
Nigeria awarded 60 per cent stake in the two blocks to KNOC and gave a 30 per cent interest to OVL and its partners. The remaining 10 per cent was awarded to local companies.
OVL refused the offer and the 30 per cent share in the Gulf of Guinea blocks was taken by Equator, sources said.
Nigeria in December notified the South Korean consortium of the cancellation, saying a fee of $323 million hasn't been paid. The Korean consortium holds 60 per cent of the two blocks, of which KNOC owns 43.88 per cent, state Korea Electric Power Corp (Kepco) 8.78 per cent, Daewoo Shipbuilding 5.85 per cent and GT&R 1.5 per cent.
Sources said KNOC had paid $92 million in cash and offered a letter of credit to pay an additional $231 million to cover its 60 per cent interest in the two oil blocks. Equator had paid a full one-third share totalling to $161.7 million.
OVL and its billionaire partner Lakshmi N Mittal already have three blocks in Nigeria - OPL-279 and OPL-285 (won in 2005) and OPL-246 (awarded to it in November 2006).
Block or OPL-323, 80-km offshore the southwest coast of Nigeria, is estimated to hold an inplace reserves of over 2 billion barrels across six large prospects. OPL-321, which lies west of OPL-323, is estimated to have similar reserves in one very large prospect.
Sources said if OVL accepts the offer, the Indian firm would get 60 per cent share in the two blocks while Equator would get to keep the current 30 per cent stake. The remaining 10 per cent would remain with the local company.
The portion of the signature bonus paid by KNOC is likely to be refunded, they said.
South Korean group had promised to build a 1,200-km gas pipeline from the southern delta to the capital Abuja and 2,250 Mw of power plant in return for the exploration rights in OPL-321 and 323. But things have not moved on those investment commitments.
