ONGC Videsh to shun burn­ing of gas at Rus­sia fa­cil­ity, eyes value-added pro­duc­tion

Resource Digest - - CONTENTS -

In a bid to sal­vage the loss-mak­ing fields ac­quired from Im­pe­rial En­ergy in Rus­sia's Tomsk re­gion, ONGC Videsh Ltd (OVL) is plan­ning to cre­ate a fa­cil­ity at the site which will en­able it to use the as­so­ci­ated gas pro­duced from the field to en­hance crude oil pro­duc­tion and also pro­duce value-added prod­ucts.

“As­so­ci­ated gas is quite pro­lific in the field and we plan to utilise it,” said an ONGC Videsh Ltd ex­ec­u­tive re­quest­ing not to be named. As­so­ci­ated gas is a type of nat­u­ral gas found mixed with crude oil re­serves or float­ing above crude oil reser­voirs. Ac­cord­ing to the ex­ec­u­tive, the com­pany is putting up the fa­cil­ity as flar­ing or burn­ing the gas at­tracts fine as it af­fects the en­vi­ron­ment and it will help in aug­ment­ing pro­duc­tion which is fledg­ling.

ONGC Videsh Ltd, the over­seas arm of In­dia’s na­tional ex­plo­ration and pro­duc­tion (E&P) com­pany Oil and Nat­u­ral Gas Cor­po­ra­tion (ONGC), had in 2009 ac­quired the as­sets of the Uk-listed Im­pe­rial En­ergy for $2.1 bil­lion and has in­vested an ad­di­tional $300 mil­lion to de­velop the as­sets.

How­ever, crude oil pro­duc­tion from the fields has been a mea­gre 7,000 bar­rels per day (bpd) com­pared with the ini­tial es­ti­mates of around 80,000 bpd. The com­pany later sought tax con­ces­sions from the Rus­sian govern­ment on mul­ti­ple oc­ca­sions. But the pleas were turned down, given that a sim­i­lar tax struc­ture was ap­pli­ca­ble to all pro­duc­ers in the re­gion.

Later, a Par­lia­men­tary panel too had rapped ONGC Videsh Ltd for the in­vest­ment which has af­fected the fi­nan­cial po­si­tion of the com­pany. “The Com­mit­tee is irked at the in­tran­si­gent stand taken by ONGC Videsh Ltd jus­ti­fy­ing the ac­qui­si­tion of the Im­pe­rial En­ergy Cor­po­ra­tion as­set. Ex­cept for re­it­er­at­ing its ear­lier reply, ONGC Videsh Ltd 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,” noted a re­port on Joint Ven­ture Op­er­a­tions of ONGC Videsh Ltd by the Stand­ing Com­mit­tee on Pub­lic Un­der­tak­ings.

Ac­cord­ing to the ex­ec­u­tive, the cost es­ti­mate of the fa­cil­ity is still to be frozen, af­ter which the ten­der­ing process for in­stal­la­tion will be ini­ti­ated. The fa­cil­ity will be able to pro­duce value-added prod­ucts such as propane, among oth­ers.

For fi­nan­cial year 2016-17, ONGC Videsh Ltd moved to black both on a stand­alone and con­sol­i­dated ba­sis. While it reg­is­tered a profit of Rs 1,749 crore last year com­pared with a loss of Rs 3,894 crore a year ago on stand­alone terms, on a con­sol­i­dated ba­sis it recorded a profit of Rs 701 crore com­pared with a loss of Rs 3,633 crore dur­ing the same pe­riod of the pre­vi­ous year.

This change in for­tunes is due to its ac­qui­si­tion of the Vankor project, which is a profit-mak­ing pro­lific propo­si­tion.

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