ONGC exits Trinidad and Tobago gas block
New Delhi: Oil and Natural Gas Corp (ONGC) has been forced to exit from a gas block in Trinidad and Tobago after its partner Lakshmi N Mittal walked out of the project.
ONGC-Mittal Energy Ltd - the joint venture of ONGC Videsh Ltd and Mittal Investment Sarl - had in 2007 won the offshore block North Coast Marine Area-2 (NCMA-2), that is estimated to hold in-place reserves of two trillion cubic feet, beating Britain`s Centrica Plc.
But last year, Mittal Investment Sarl (MIS) decided to exit the project possibly because of global economic downturn.
"When we had bid for the block in Trinidad and Tobago, we had consciously decided not to take more than 51 percent stake. After the exit of MIS, we had the option of doing the project entirely on our own but that did not fit into our scheme of things," an OVL official said.
OMEL had 65 percent interest in the block while Trinidad and Tobago`s state-owned oil firm Petrotrin had the remaining. Under the initial agreement, OMEL was required to carry Petrotrin during the exploration phase (OMEL contributing Petrotrin`s share of investment).
After the exit of MIS, OVL - the overseas investment arm of ONGC - would have to foot the entire $304 million exploration expenditure with Petrotrin not willing to share any risk. "We tried to get an international energy firm as partner but did not succeed so we had no option but to exit the block," he said.
OMEL had also committed to pay a signature bonus of $30.1 million for the acreage, but this was never paid as the Production Sharing Contract (PSC) was not concluded.
NCMA-2 was considered OMEL`s second biggest success after Nigeria where the joint venture had acquired two exploration areas.
Mittal had identified Trinidad and Tobago as one of the eight priority nations for pursuing oil and gas opportunities exclusively with ONGC. But off late, it has started exiting most of the investments, including a prospective Satpayev oilfield OMEL got in Kazakhstan.
ONGC and Mittal had in July 2005 inked a joint venture agreement for acquisition of oil and gas fields, refinery business and LNG projects in 27 countries. The agreement had classified target countries into Schedule-I and II.
Mittal and ONGC had agreed to participate on an exclusive basis through OMEL in Schedule-I countries such as Angola, Azerbaijan, Indonesia, Kazakhstan, Romania, Trinidad and Tobago, Turkmenistan and Uzbekistan.
In Schedule-II countries of Bosnia, Canada, China, Czech Republic, France, Germany, Kyrgyzstan, Liberia, Sudan, Macedonia, Mexico, Nigeria, Poland, South Africa, UK and the US, the two partners agreed to bid jointly on a case-to-case basis.
Sources said, while OMEL was required to carry a 35 percent participating interest of Petrotrin in NCMA-2, the Trinidad and Tobago government had demanded that OMEL sign an indemnity arrangement to protect its state-run firm from any losses in case the exploratory programme in the block was unsuccessful.
This was not agreeable to OVL, which wanted Petrotrin to share its cost.
The total estimated cost for the first phase of exploration was $304 million, with OVL`s share at $155 million. If OVL was to take the block on a standalone basis, its share of investment would have increased by $149 million.
OVL`s $155 million investment was based on a minimum expectation of 14 percent return on capital.
Sources said initially Centrica, RWE Dea AG of Germany, BG Group of the UK and Repsol of Spain had expressed interest in the project once MIS walked out but none made any formal offer for participation.
Unable to secure a partner, OVL finally decided to withdraw from the project, they said. The company has written-off less than million dollars of administrative expenses incurred on the block.
More from India
More from World
More from Sports
More from Entertaiment
- Indian Army 5th deadliest in the world: Report
- DNA: Analysis of public pulse through survey by Zee News on Bihar elections
- Hotels selling beef should be demolished: Azam Khan
- DNA: End of ISIS? Vladimir Putin to send 1,50,000 soldiers to Syria
- Dadri lynching: UP CM Akhilesh raises compensation to Rs 45 lakh
- Neither Dadri nor Babri: India is 'Muslim woman delivering 'Ganesha' inside temple'
- Hindu girl embraces Islam to marry Shahi Imam Bukhari's son?
- Pakistan take note! Indian military 5th deadliest in the world
- Lalu Prasad Yadav debuts on Dubsmash, mocks PM Narendra Modi – Watch video
- Sundar Raman, tainted IPL franchises face uncertain future