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ONGC Videsh Ltd (OVL) is in talks with PetroVietnam to offload its stake in Block 128 in the disputed South China Sea. The overseas arm of the government-controlled Oil and Natural Gas Corporation (ONGC) had got a two-year extension ending June 2014 for the block, which it had earlier planned to exit.
The extension came after Vietnam offered additional data which could help the block become commercially viable.
"We are looking for a partner for Block 128 where we currently hold 100 per cent interest. We are talking to PetroVietnam and some others," said OVL Managing Director S P Garg.
He added that OVL would retain the majority 51 per cent stake in the block, which the Chinese had claimed was in its territorial waters.
Dispute arose after China opposed Indian presence in the region. Besides, China National Offshore Oil Corp offered nine blocks in the South China Sea for joint exploration with foreign companies, including parts of Block 128.
Vietnam had in November 2013 also offered to give OVL five offshore oil and gas exploration areas without bidding in order to counter China's influence in the region. The five blocks or areas - 17, 41, 43, 10&11-1 and 102 & 106/10 - lie outside the territory claimed by China in the South China Sea.
Highest-ever capex
Garg said OVL recorded the highest-ever capital expenditure of Rs 35,000 crore last year, of which Rs 30,000 crore was in acquisitions. The three-fold increase over Rs 10,891 crore capex in 2012-13, came with acquisition of Videocon's stake in a Mozambique block and a 12 per cent equity in a deepwater block in Campose Basin of Brazil.
Besides, OVL is in the process of finalisation of production-sharing contracts in Bangladesh and Myanmar. The company's cumulative investments in various overseas oil and gas assets since its inception was Rs 78,000 crore till March 2013.
The firm recorded a 15 per cent increase in production volumes at 8.36 million tonnes (mt) of oil and oil equivalent during 2013-14, compared to 7.26 mt in FY13. Garg said production increased due to acquisition of 2.72 per cent stake in the ACG project in Azerbaijan, an additional 12 per cent stake in Block BC-10 in Brazil, and the commencement of gas production from A1 and A3 blocks in Myanmar.
Borrowing against crude oil production
For refinancing its bridge loans, OVL plans to go for borrowing in the US and Euro bond markets.
"We are also examining the possibility of taking foreign currency loans against crude oil sales for the first time," said Garg. A consortium of banks including State Bank of India would be part of this. Although OVL can raise up to $4 billion against production, Garg said it was only looking at $500-700 million. Prior to 2013-14, OVL had financed its plans through interest-free loans from ONGC but Garg said OVL had to resort to borrowing on its own because of the burden of subsidy-sharing on ONGC and the precarious current account deficit situation of the country.
During the year, it raised bridge finance of $883.5 million for the Azerbaijan asset. It raised loans of $4 billion to finance the Mozambique deal.
