Oil PSUs win Venezuela crude

Three of India’s state-owned oil firms have together bagged an 18 per cent stake in developing a major oil field in Venezuela. ONGC, Oil India and Indian Oil — along with consortium partners —Repsol of Brazil and Petronas of Malayisa, will have a 40 per cent stake in the project. Venezuela’s state-owned oil company PDVSA will own the remainder. The total production from the oil field will be 20 million tonne a year at full flow. First production from the field is expected in three years time and will be ramped up gradually.
The Indian companies will be paid their share in equity oil — which they can either sell locally or bring to India. The total share of Indian firms in the project is 18 per cent, so the share here will work out to 3.6 million tonne a year. This oil could be brought to India. Petroleum from this field is extremely hard to process — so far, only Reliance in India has the capability to process this oil. An upgrade is also being planned for MRPL – which is an oil refiner and a subsidiary of ONGC to allow it to process this crude.
The total investment in the project will work out between $15 billion and 20 billion, says a company source. This investment will be over the life cycle of the project, which is 40 years. Market sources say that the winning consortium will lend $2 billion to PDVSA as a part of the bargain. The final agreement is to be signed in March.
While Indian companies have been searching for oil and gas assets around the world, Venezuela is also trying to attract foreign oil companies. Several global oil majors such as Exxon-Mobil and ConocoPhillips had left Venezuela as they didn’t agree to the new conditions imposed by the government in recent years.
Venezuela’s oil production has also fallen in the recent years. Venezuela has an estimated 99 billion barrels of known petroleum reserves — the world’s fifth largest. However, the country also has about 1,200 billion barrels of heavy oil reserves — which are equal to the currently known reserves of conventional oil. The current project is for development of heavy oil.

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