With South Sudan voting to be a separate nation -- full results aren’t in, but the early returns show a huge vote for separation -- in a referendum last week, ONGC Videsh Ltd (OVL) could see its assets in the African country divided between North and South Sudan.
Though the company does not anticipate much impact on its operations there, saddling between two countries could be a challenge, especially since it had not encountered such a situation elsewhere in its business.
A senior official, who did not want to be named, said oil fields in which OVL had interest were in both the territories. The 1,600-km Greater Nile Oil Pipeline, in which OVL has 25 per cent interest, begins in the south and connects the Khartoum refinery in the north to Port Sudan on the Red Sea. “Though everyone is keeping a watch, there may not be much impact eventually, since both the sides have conveyed that oil activities will not be hampered. It is in their interests to see that oil operations run smoothly,” said the official.
While OVL has the biggest presence in Sudan among all Indian companies, government-controlled Bharat Heavy Electricals Ltd (BHEL) also has a 500 Mw power plant in North Sudan.
The referendum that took place in South Sudan from January 9 to 15 on whether the region should remain a part of Sudan or become independent was done under a 2005 agreement between the Khartoum central government and the Sudan People's Liberation Army. While South Sudan has most of the producing oil assets anreserves, North Sudan has refineries and port facilities from which exports take place. "The impact on the oil economy would depend much on the referendum in Abyei, an oil-rich area of about 10,460 sq km, to join either side, as both claim Abyei as their part," said Goutam Ghosh, head, Arab division, of the business chamber, Ficci. The Abyei vote is yet to take place.
Last week’s development was on expected lines. “Sudan has witnessed civil war for a long time and the referendum was part of a peace process, even though when the contracts were signed, nobody expected the country will break. We expect that contracts will be covered under the normal government contracts that will be signed by the two sides,” said an official.
Wait ahead
Ghosh says companies need to wait and see if the contract signed between India and Sudan before the division would be honoured by South Sudan, once created, or new contracts needed to be signed.
OVL through its subsidiary, ONGC Nile Ganga BV (ONGBV), has 25 per cent interest in the Greater Nile Oil Project (GNOP) in the Muglad Basin, around 700 km south-west of the capital, Khartoum, and consists of onland blocks 1, 2 and 4, spread over 49,500 sq km. Other partners in this project are China National Petroleum Corporation (40 per cent), Petronas Carigali Overseas Sdn Berhad, a subsidiary of the Malaysian National Oil Company, Petronas (30 per cent) and Sudapet, the National Oil Company of Sudan (five per cent). ONGBV’s share in oil production from GNOP was 2.126 million tonnes during 2009-10, as compared to 2.443 mt during 2008-09.
Besides, OVL also holds 24 per cent in block 5A in the Muglad basin in South Sudan, with Malaysia’s Petronas (67.875 per cent) and Sudapet (eight per cent). OVL’s share of oil production from the project was 0.247 mt for 2009-10, as compared to 0.285 mt for 2008-09.
BHEL is targeting to commission all the four units of its power plant at Kosti this year. “We were looking to transmit some of the power from this plant to South Sudan but now Sudan’s National Electricity Corporation will have to take a call,” said a senior BHEL executive. After construction of the power plant, the company has a contract to supervise the operations for two years.
Senior executives in the two companies note South Sudan could throw in some business opportunities as well. “With the area rich in oil reserves, the government there would be using resources to build infrastructure there,” said an executive.
Ghosh, though, advises Indian companies at this point to hold their future plans of investment, if any, till the creation of South Sudan as a country. "Wait for the opportunities being thrown open for investment after the division by the respective countries for attracting foreign investment. Any decision would depend on the stability and peace in the two countries. Untill we know the outcome of the Abyei referendum (if and when it happens), it's premature to comment," he added.
