ONGC Videsh (OVL), which has presence in 16 countries, plans to buy more producing assets to achieve the milestone of 20 million tonnes of oil and equivalent by 2018. The government-owned explorer?s production from several foreign projects has taken a hit due to local unrest. In his first media interview after taking charge, OVL managing director Narendra Kumar Verma talks to Siddhartha P Saikia about his priorities. Edited excerpts:
You are an ONGC Group veteran and also served as director of OVL earlier. How would you like to drive the explorer now?
The target is to transform OVL into a full fledged international exploration and production company, which would be in line with the strategy, risk taking, portfolio, operating skills and competency. To do this, we need to energise human resource.
What are the production ramp up targets before you? Are you expecting a double-digit output figure in FY15?
We are contemplating to double our output to 20 million tonnes of oil and oil equivalent by 2018. Last year, output was around 8.5 mtpa. In FY15, we would certainly achieve more. I cannot say now if we would touch a double-digit production figure. In case situation improves in South Sudan, we would certainly touch double-digit production.
How do you plan to achieve the 2018 target?
My priority is to add additional 4-5 mtpa production in the next three to four years. There is no other option than to consider buying equity in prolific oil and gas bearing areas. Currently, there are 14 projects with OVL. If we succeed in 50% of these, that may add 4-5 mtpa. We would be targeting additional acquisitions in next four-five years. Mozambique project would also contribute 4-5 mtpa when it comes up for production.
What about projects OVL recently acquired?
We have added two blocks each in Myanmar and Bangladesh. We hope to get positive results, These are exploratory phases.
For past many years, there has been a debate to carve out OVL from its parent ONGC. What are your views?
I think, ONGC as a parent is the best way to nurture OVL?s growth. It will be in the best interest of the group to compliment each other. Because, ultimately, OVL is going to be the growth engine for ONGC in the coming decade. If you hive it off ? OVL does not have the substantial strength needed to function immediately as an independent company. Both will have
an impact on day-to-day business and future growth.
There were proposals to launch an IPO for OVL. Do you want to take the firm public?
There is an argument to list OVL on the exchanges. But I do not believe the argument is strong. Once the company goes to high risk portfolio, it would immediately be subject to volatility in the short term. We have two motives ? to secure the country?s energy security as well as to grow commercially. But when we are aiming for larger prospective of energy security we have to be stable. We cannot operate with day-to-day pressure. We have some good portfolios now and listing would limit our ability to leverage them.
But you can leverage on the market capitalisation post listing?
There are some positives that OVL can leverage additional funds and valuation post listing. But, as far as valuation is concerned, OVL?s gross valuation is embedded in ONGC balance sheet. Till last year, OVL invested more than R73,000 crore. After the latest Mozambique acquisition, it has crossed R1 lakh crore.
Mozambique Parliament has recently passed the petroleum law. Still, the LNG project is not covered under the cost-recovery model. Do you think there is a risk to OVL?s over $5-billion investment in the country?
The model of cost recovery production sharing contract (PSC) is clear. The PSC as such doesn?t cover the LNG terminal. The consortiums have argued with Mozambique that this is value creation and they should consider an integrated PSC model. Once, it is made part of PSC, it would get the synergy and the project would be fast tracked. There are two consortiums that found hydrocarbon in the country ? one is led by Italy?s ENI and the other is by US? Anarkado (where OVL is a partner). There are major discoveries in both the block and there needs to be gas balancing also, as one of the major fields is spread across both the blocks. The government would come up with a scenario, which will be profitable for all stakeholders.
