ONGC Plans To Invest $200 Mn In Venezuela To Revive San Cristobal Oilfield

India's Oil and Natural Gas Corporation (ONGC) plans to invest around $200 million to revive production at its San Cristobal oilfield in Venezuela, where output has dropped sharply over the years, as per a report by The Economic Times (ET).

ONGC Videsh Ltd (OVL), the overseas arm of ONGC, has secured a US licence allowing it to continue operations at the field and is nearing an agreement with Venezuela’s state-owned oil company PDVSA on the investment plan, the report said.

PDVSA holds a 60% participating interest in San Cristobal, while OVL owns the remaining 40%. Under the proposed arrangement, OVL would also finance PDVSA’s portion of the investment and recover the amount from future oil production, it added.

The planned $200 million outlay, including PDVSA’s share, is expected to be deployed over roughly the next 12 months, according to the ET report.

ONGC Targets Higher Production

San Cristobal is currently producing about 4,000-5,000 barrels of oil per day. OVL intends to significantly increase output, with a longer-term objective of reportedly taking production back towards the field’s earlier peak of 45,000-50,000 barrels per day.

In its latest annual report, ONGC had said: "OVL has been granted specific license by the US Office of Foreign Assets Control (OFAC), enabling continued operations, investments, and marketing of production from its Venezuelan assets."

"It also permits the acquisition of additional participating interests and new oil and gas opportunities in Venezuela thereby strengthening OVL’s international operations and growth prospects," it added, as per ET.

Venezuela’s Oil Sector Faces Challenges

Venezuela’s oil output has suffered from years of low oil prices, economic mismanagement and US sanctions, while PDVSA’s operational capabilities have weakened.

Following the capture of Venezuelan President Nicolas Maduro in January, the US has exercised effective control over the country’s oil sector.

Foreign companies are required to secure US licences to operate oilfields and manage oil sales and revenues.

Carabobo-1 Investment Plan Yet To Be Finalised

In June, ET had reported that OVL was in discussions with PDVSA to acquire all or part of its interests in San Cristobal and Carabobo-1.

OVL owns an 11% participating interest in Carabobo-1, while Indian Oil and Oil India each hold 3.5%, Repsol has 11% and PDVSA owns the remaining 71%, the ET report said.

There has been limited progress on acquiring additional interests in the two fields, and OVL has not yet finalised an investment plan for Carabobo-1.

Reviving San Cristobal could also help ONGC recover more than $500 million in dividends from the Venezuelan oilfield that have remained stuck in the country for years.