OVL's Sudan output to resume by June

Despite the on-going disagreements related to transit fee and strife between Sudan and South Sudan, ONGC Videsh (OVL), the overseas exploration and production arm of Oil and Natural Gas Corporation, is hopeful that production from its Sudan fields will be back to normal within the next two to three months.

A senior company official from ONGC said that there are some negotiations going on related to the transit fee and this is being worked out.

“But we expect to start production from Sudan in the next two-three months,” he said.

According to media reports, OVL’s chairman D K Sara had also requested the Petroleum Ministry to interfere and help the company sort out the issue of sky-high transit fee as well, which will eat into the company’s financials.
After a prolonged struggle, South Sudan was seceded from Sudan on July 9, 2011. This led OVL and its partners, who together operate the Greater Nile Petroleum Operating Company (GNPOC), see their blocks getting divided between two disturbed neighbours.

Consequently, OVL and its partners had in January shut oil production from GNPOC project after a dispute between South Sudan and Sudan over pipeline transit fees.

According to the company’s website, GNPOC produced about 85,000 barrels per day of crude oil before being shut due to disagreements between the two neighbours.

OVL’s owned a 25%share in GNPOC concession in the Western Upper Line area, which included the large Unity and Heglig oil fields plus smaller fields at El Toor, El Noor, Toma South, Bamboo, Munga and Diffra.

China National Petroleum Corp (CNPC) holds 40% in GNPOC while Petronas of Malaysia has 30%. The remaining 5% is with Sudanese national oil company Sudapet.

OVL’s oil blocks 1, 2 and 4 fall in the region between the two countries and Block 5A was present in South Sudan.

Later, while the two countries reached a deal for evacuation of crude, according to the agreement reached between the two countries, the oil producers would have to shell out $8.40 per barrel transportation charge and another $1.60 as processing fee. Also, $1 per barrel transit fee has to be paid for allowing passage of oil from South Sudan to Sudan.

“This transportation fee is really too high for the company to bear,” said official, and added that talks are on at various levels to resolve the issue.

In fact, due to the problems in Sudan, Syria, and its UK-based Russia-focussed oil company Imperial Energy, the company posted an 8% drop in oil production and 5.7% drop in gas production in FY12.

The official did not give any better guidance for the current fiscal too but said fiscal 2014 look a little better.

@promit07