STATE-RUN ONGC Videsh (OVL), vested with the key responsibility of bolstering the country’s energy security by acquiring hydrocarbon assets abroad, is adding less proven reserves to its portfolio than it is producing, going by data up to 2012-13. This, according to analysts, reflects poor selection of assets, if not an early wearing out in what ought to be a long-distance race.
Company officials, however, say the current year would see a jump in both production and reserves.
OVL was formed in June 1989 from the erstwhile Hydrocarbons India and has since grown to become the second-largest exploration and production (E&P) company in India after parent ONGC both in terms of oil production and oil and gas reserve holdings.
According to sources, around 20 overseas oil and gas blocks in which OVL held stakes either as an operator or in the form of a participating interest (PI) have been relinquished over the last three years. More than $500 million worth of investments have been written off as a result of the relinquishment.
OVL’s proven and probable reserves stood at 401.515 million tonnes of oil equivalent (mtoe) as on 2010-11 and this fell to about 395.613 mtoe at the end of 2012-13. “Relinquishing blocks is a normal practice in oil and gas exploration. We expect to book new reserves by the end of FY14,” said DK Sarraf, OVL managing director.
Former ONGC chairman RS Sharma said it’s not just OVL that has seen a fall in proven reserves but also other global oil majors. This, he said, can be partly attributed to the trend of “resource nationalism” or the national policies to keep majority share in hydrocarbon assets with local firms.
According to the OVL website the company currently has participation in 32 projects in 16 countries, out of which 12 are producing projects, four discovered/ under-development projects, 14 exploratory projects and two pipeline projects.
The reasons for relinquishment of the blocks vary from the absence of hydrocarbon presence, high risk with uncertain rewards and the viability of undertaking the exploration.
In some other cases like in Nigeria, OVL backed out as downstream investments attached to it imposed unsustainable financial burdens.
As for individual blocks, OVL wrote off $70 million of investments in an offshore deep-water block in Vietnam called Block 127 where it held 100% operatorship interest, while in Brazil the company sunk investments to the tune of $105 million in blocks