November 14, 2002
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ONGC keen to ensure India's energy securityRamesh Menon in New Delhi Soon after the announcement of a major gas discovery by Reliance Industries Limited in the Krishna-Godavari basin off the Andhra Pradesh coast, comes the announcement of the acquisition of 25 per cent stake in a Sudanese oil field by ONGC Videsh Ltd., the overseas arm of the Oil and Natural Gas Corporation. This is expected to give India three million tonnes of oil every year. The Sudan oilfield has reserves of around 150 million tonnes. It is presently producing about 12 million tonnes a year.
By the end of 2002, a gas field in Vietnam will start producing gas. This is good news for India, says Naik as the OVL has invested Rs 900 crore (Rs 9 billion) in this gas field. The Vietnam gas field is expected to start producing about 7.5 million cubic metres of gas. With OVL's acquisition of 20 per cent stake in Sakhalin oil field in Russia last year, Naik says India would benefit from this investment with four to eight million tonnes of crude oil apart from gas in another three years. Naik said that his ministry would meet the ministries of excise and sugarcane development of nine major sugar-producing states and union territories to review progress and availability of ethanol for the supply petrol blended with 5 per cent ethanol from January 1, 2003. When India's ONGC Videsh Ltd decided to invest about $750 million earlier this year to buy a stake in an oil project in Sudan torn by civil war and terrorism, it raised some eyebrows.
Talisman was stung by scathing criticism in the West from various church and human right organisations which charged that the money from the oil project is being allegedly funneled to fund the civil war against rebels for the last twenty years. India's Cabinet okayed the proposal to buy Talisman's 25 per cent stake in Greater Nile Petroleum Operating Co which runs the 2,30,000 barrels a day project. Petroleum Minister Ram Naik told rediff.com that the deal was struck after a lot of thought as the oil field is better than the Bombay High oil field which is the best in India. Said Naik: "It is undoubtedly a good business proposal. As we will have 25 per cent of the equity in the Sudan oil field, it will reduce our imports to a great extent." "Fortunately, it is a working oil field. India will start getting three million metric tonnes of oil annually out of the 12 million metric tonnes produced by the Sudan well. We made a very conscious and commercial decision." The question that many are asking is why OVL chose to put its money in Sudan of all countries in the world. Sudan has been pockmarked by terrorism for years and has been torn by civil strife. The West has looked at Sudan with suspicion because of its links with terrorism. A finance ministry official told rediff.com: "The question is whether we have the skills and the tenacity to operate where others fear to tread. The answer is yes. Technically, it is a deal. OVL was created to do international business. They have to go out and bid and take risks if they are to do business." China National Petroleum Corporation holds 40 per cent interest in this oil and gas field. Malaysia's Petronas holds 40 per cent. Sudan's National Oil Company has five per cent and soon, India's ONGC Videsh Ltd will hold 25 per cent. Naik agreed that there were some political overtones but there were other international companies operating there and India had taken care to get the investment insured by the World Bank's Multilateral Investment Guarantee Agency. "There is absolutely no room for apprehension as some are having," he said.
There will be operational problems due to the civil war. Do Indian officials operating there have the protection of the Sudanese government? Can the government assure India that terrorism will not be allowed to affect operations? The mercantile argument is that India had struck the deal at a fairly good price as other bidders, especially in the West have shied away as they have high security concerns. India has the manpower and the tolerance level to work in tough conditions, says a government official. ONGC Videsh Ltd two years ago had invested in the Russian oil field, Sakhalin, situated in the northeast that was highly inaccessible as it was snow clad. The drilling cost was very high because of the geographical conditions. It did not seem like a great deal then. But as luck would have it soon after OVL got into Sakhalin, there were huge discoveries of new oil and gas. After that Shell, Mobil was interested in buying stakes there. OVL is now looking at an offer to develop a number of oil fields with proven oil reserves in Russia. The $1.7 billion deal in Sakhalin is expected to give India 2.5 million tonnes of oil annually in another three years. Pointed out A V Naik, deputy director, Confederation of Indian Industry: "The basic aim of India is to get oil equity abroad. The investment looks reasonable. If you see it from the point of oil security, it is okay. ONGC have been doing wise investments and have obviously done their homework. Sakhalin was a point to prove it." OVL is also seriously considering a stake in Kazakhstan's Alibekmola belt besides negotiating participation in 14-15 other oil properties abroad. It is considering projects in, Indonesia, , Vietnam Libya, Russia, United Arab Emirates, Iran, Nepal Venezuela and Algeria. The deal in Sudan goes with ONGC's strategy of buying stakes in foreign fields to make up for declining output in India. More than two thirds of India's crude needs for its 17 refineries that process 2.3 million barrels a day are imported. ALSO READ:
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Ram Naik, India's Petroleum and Natural Gas Minister, feels that India is well on the road to energy security very soon and the Sudan investment was a sound one.
Critics at that time said that Canada's 
Apparently, the oil well could be very lucrative as it has good reserves. But there are some disturbing questions.