New Delhi: The return of US sanctions on Venezuela after a six-month breather has thrown India's oil-for-dividend plan with the Latin American country into disarray, leaving ONGC Videsh Ltd looking for new options to tackle the promised to bring in oil shipments.
The lifting of six-month sanctions ended Friday without any progress on the oil-for-dividend plan agreed between the two countries. US officials have now indicated that sanctions will return.
OVL is exploring viable options to secure the crude, and its legal and marketing teams have acted to do so, a person with knowledge of the matter said.
“It would take some time before Venezuela would send oil. The country's production capacity has also declined due to the years of sanctions, which need to be rejuvenated. The likelihood of a new sanction raises concerns about whether these shipments will actually be delivered,” the person said. on condition of anonymity.
Venezuelan state energy monopoly PdVSA owes around $600 million in dividends to OVL, which owns a 49% stake in the operational San Cristobal project, and 11% in Carabobo, which is under development.
In January, Mint reported that OVL is in talks with its Venezuelan partner PdVSA to secure oil cargoes to settle long-outstanding debts owed to the ONGC arm.
In response to a query, an OVL spokesperson said: “Our legal and marketing teams are working on the matter,” adding that the company would return once a clear picture emerges.
Questions to the Union Ministry of Petroleum and Natural Gas and Petroleos de Venezuela SA (PdVSA) remained unanswered as of press time.
The US, which briefly lifted sanctions on Venezuela's oil sector in October, plans to revive them over Venezuelan President Nicolas Maduro's inability to hold free and fair elections.
The return of sanctions could also affect OVL's plans to operate the two Venezuelan projects. OVL managing director Rajarshi Gupta had said in February that the company would consider investing more in the country to boost productivity.
“The lifting of sanctions is a very positive sign. We are in very advanced discussions with the government of Venezuela to get more cargo to liquidate our dividends and at the same time to get the two projects we have there operating and increase production from there. We will have to invest in the two projects to achieve more production. That is still being worked out. We will have to invest because Venezuela has the largest reserves in the world. So if we invest more, we will get more production,” he had said.
OVL and PdVSA currently operate the projects jointly. OVL acquired 40% of the San Cristobal project in Venezuela in 2008, while PdVSA owned the remainder 60%. ONGC Videsh holds the stake through ONGC Nile Ganga (San Cristobal) BV, a wholly owned subsidiary of ONGC Nile Ganga BV