In yet another setback for ONGC Videsh (OVL) in overseas markets, Sudan has denied extension of licence for an oilfield to the company citing disagreements over changes proposed in royalty and taxation structure.
OVL, the overseas arm of the state-run explorer Oil and Natural Gas Corporation (ONGC), has been operating block 2B of Greater Nile Oil Project in Sudan along with partners China National Petroleum Corp (CNPC) and Malaysia's Petronas since 2003.
But with consistent fall in oil prices and resultant revenues for the government, Sudan has been seeking higher share of royalties and taxes in return for extending licence for the oilfield.
The licence for Block 2B expired last November and an automatic 5-year extension is available.
OVL (25 per cent stake) and its partners CNPC (40 per cent stake), Petronas (30 per cent) and Sudapet of Sudan (5 per cent) wanted a 5-15 year extension, but Sudan did not agree without changes in royalty and taxation structure.
OVL had in 2003 bought 25 per cent stake in Greater Nile Oil Project (GNOP) comprising Block 1, 2 and 4 in the undivided Sudan.
It lies in the prolific Muglad basin, about 780 kms in the South-West of Khartoum, the capital of Sudan. The project produces about 50,000 barrels of oil per day.
Upon secession of South Sudan from Sudan in July 2011, the contract areas of blocks 1, 2 and 4, spread over both areas, were split with a major share of production and reserves now situated in South Sudan.
Blocks 2A, 2B and 4N are in Sudan, and blocks 1A, 1B as well as 4S are in South Sudan.
Block 2B produces 28,000 bpd of oil while Block 4 is in the exploration phase.
Sudan has not paid OVL for the oil from GNOP it consumed. Post secession, as the Sudanese government's share of total production in Sudan was not sufficient to meet requirements of local refineries, foreign firms were asked to sell their share of crude oil to it.
However, the payment of dues on account of crude oil purchased by the Sudanese government has not been received, he said, adding that OVL's share of the outstanding dues is about $ 300 million.
OVL has lost out of several oil and gas assets in Africa and Latin American region to more power oil companies in the US and China and has been looking more at government supported arrangements to get oil and gas assets abroad.
