The Hindu : Business : OVL, PDVSA of Venezuela to form joint venture

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Thursday, Apr 10, 2008
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OVL, PDVSA of Venezuela to form joint venture

Sujay Mehdudia

Both will invest $400 m to develop the San Cristobal oil field

Indian company
will have
two directors
Scope for investment in upstream units

— PHOTO: AFP

GETTING A FOOTHOLD: Union Minister of Petroleum and Natural Gas, Murli Deora (left) and Venezuela’s Minister of Energy and Petroleum, and President of State-owned oil company, PDVSA, Rafael Ramirez, during a meeting at PDVSA’s headquarters in Caracas on Wednesday.

CARACAS (VENEZUELA): Venezuela, one of the world’s leading countries holding the highest oil reserves after Saudi Arabia, on Tuesday inked a historic agreement with India to form a joint venture with an investment of $400 million, offering a major stake in its San Cristobal oil field project. It also promised multi-billion dollar investments in refinery, petrochemicals and other related activities in the oil and gas sector of India.

Pact signed

The landmark agreement was signed between Indias Oil and Natural Gas Corporation Videsh Ltd. (OVL) and Venezuela’s state-owned oil company Petroleos De Venezuela S.A. (PDVSA) at a ceremony held here on Tuesday. The agreement was signed in the presence of Indian Petroleum Minister Murli Deora, who became the first Indian Petroleum Minister to visit the Latin American nation, and Venezuelan Oil Minister Rafal Ramirez Carreno, who immediately declared that his country would favourably consider the request for giving a stake in the gas sector also to GAIL India Ltd. (GAIL).

Mr. Deora said OVL would make a total investment of $355.738 million, comprising signature bonus of $173.1 million for the stake. Besides, ONGC might be required to sanction a loan of $355.74 million for the project that covers 160.16 sq. km. and is located in Junin in the Orinoco Heavy Oil belt of Venezuela.

Production from the San Cristobal field was started in October 1981. Till date, 44 wells had been drilled, of which 24 were active. The field was now producing about 24,000 barrels of oil a day. Capital expenditure on the field would be $446.13 million, Mr. Ramirez said.

India, the fastest-growing economy after China, estimates that the oil demand will rise by 62 per cent over the next five years to 241 million tonnes a year, or 4.8 million barrels a day.

OVL and the PDVSA subsidiary will form a joint venture company to operate the San Cristobal project. The Indian firm will have two directors on the board of the joint venture company, while the PDVSA subsidiary would have three directors including the Chairman.

Proven oil reserves

Venezuela, the only OPEC member from Latin America, is one of the top four oil producing countries in the world. It has 87.04 billion barrels of proven oil reserves, largest in the western hemisphere. Officials said OVL would look at the possibilities of shipping its share of oil from San Cristobal to India.

Further, Mr. Deora said India was investing in oilfields abroad for its energy security and it had made the strategic move to get a foothold in Venezuela. Oil assets abroad would give the nation (India imports 79 per cent of its crude needs) secured supplies. As a beginning, OVL had taken 40 per cent stake in the San Cristobal oilfield to pump 232.38 million barrels of crude over 25 years. “This is just the beginning of a relationship between the two countries. The two countries complement each other. Venezuela has large oil reserves, [while] India is an oil consuming country,” Mr. Ramirez said.

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