ONGC, CEN­TRE FACE FLAK FOR IM­PE­RIAL EN­ERGY AC­QUI­SI­TION

PAR­LIA­MEN­TARY PANEL RAISES QUES­TIONS ON STAKE SALE TO RUS­SIAN UNITS, PER­FOR­MANCE

Resource Digest - - MANPOWER -

APar­lia­men­tary panel has slammed ONGC Videsh’s (OVL) ac­qui­si­tion of Im­pe­rial En­ergy Cor­po­ra­tion, as well as the Cen­tre’s and the com­pany’s sub­se­quent replies to the panel’s rec­om­men­da­tions.

“The Com­mit­tee is irked at the in­tran­si­gent stand taken by OVL jus­ti­fy­ing the ac­qui­si­tion of Im­pe­rial En­ergy Cor­po­ra­tion as­set. Ex­cept re­it­er­at­ing its ear­lier re­ply, OVL has not of­fered any jus­ti­fi­ca­tion for its ill-con­ceived de­ci­sion not to farm-out part of its stake in IEC to lo­cal Rus­sian firms/en­ti­ties and its un­re­al­is­tic es­ti­ma­tion of oil re­serves and pro­duc­tion tar­gets,” a re­port on Joint Ven­ture Oper­a­tions of ONGC Videsh by the Stand­ing Com­mit­tee on Pub­lic Un­der­tak­ings has said.

PANEL’S CRIT­I­CISM

The panel’s re­port added that Min­istry of Petroleum and Nat­u­ral Gas’ claim that post-ac­qui­si­tion IEC was suc­cess­ful in ramp­ing up pro­duc­tion to 19,200 bar­rels of oil per day (bopd), is “woe­fully short” of the es­ti­mated pro­duc­tion tar­get of be­tween 35,000 to 80,000 bopd.

Im­pe­rial En­ergy Cor­po­ra­tion Plc was an in­de­pen­dent up­stream oil ex­plo­ration and pro­duc­tion com­pany ac­quired by OVL in Jan­uary 2009 hav­ing its main ac­tiv­i­ties in the Tomsk re­gion of Western Siberia, Rus­sia. The ac­qui­si­tion was made at an in­vest­ment of about $2.9 bil­lion. On the is­sue of crit­i­cism of un­re­al­is­tic es­ti­ma­tion of re­serves/pro­duc­tion, the Cen­tre in­formed the Com­mit­tee that re­serves of IEC were cer­ti­fied by Degolyer&macnaughton (D&M), an in­ter­na­tion­ally re­puted Us-based re­serves au­dit firm.

STAKE SALE IS­SUE

On the de­ci­sion of OVL choos­ing not to sell a stake to a lo­cal part­ner, the Cen­tre said that stake sale also de­pends on risk re­ward per­cep­tion and pre­vail­ing mar­ket con­di­tions.

“In Au­gust 2008, OVL had no plan to farm out any stake of the tar­get as­set and hence no par­tic­i­pat­ing in­ter­est was farmed out,” the Cen­tre’s re­ply stated.

The panel also said that its “grow­ing ap­pre­hen­sion” that all is not well with the IEC ac­qui­si­tion, has been con­firmed with the com­pany’s as­ser­tion that such reser­voirs else­where in the world have been suc­cess­fully ex­ploited with ap­pro­pri­ate tech­nol­ogy and a favourable tax regime. To this, the Cen­tre said that OVL is en­gaged in part­ner­ship of a Us-based in­de­pen­dent ex­plo­ration and pro­duc­tion com­pany for a pi­lot scale ap­pli­ca­tion of hor­i­zon­tal drilling and frack­ing to ex­ploit th­ese reser­voirs.

“The full-fledged ap­pli­ca­tion of the new tech­nol­ogy to en­hance pro­duc­tion from the as­set shall fol­low the on­go­ing pi­lot pro­gram based on its re­sults,” the Cen­tre stated in its re­ply.

The panel con­cluded stat­ing that it would like to be ap­prised of the progress made in OVL’S at­tempt to turn­around the per­for­mance of the IEC as­set.

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