ONGC Videsh Ltd. (‘OVL’)

ONGC Videsh Ltd. (‘OVL’) a Miniratna Schedule “A” Central Public Sector Enterprise (CPSE) of the Government of India under the administrative control of the Ministry of Petroleum & Natural Gas is the wholly owned subsidiary and overseas arm of Oil and Natural Gas Corporation Limited (ONGC), the flagship national oil company (NOC) of India. The primary business of OVL is to prospect for oil and gas acreages outside India, including exploration, development and production of oil and gas. OVL owns Participating Interests in 32 oil and gas assets in 16 countries and contributes to 12% and  7 % of oil and natural gas production of India respectively. In terms of reserves and production, OVL is the second largest petroleum Company of India, next only to its parent ONGC.

GENESIS, BACKRGOUND and the evolutionary story of OVL History and Background.

OVL was incorporated as Hydrocarbons India Pvt. Ltd. on 5 March 1965 to carry out exploration and development of the Rostam and Raksh oil fields in Iran and undertaking a service contract in Iraq. The company was rechristened as ONGC Videsh Limited on June 15, 1989 with the prime objective of marketing the expertise of ONGC abroad. The nineties saw the Company engaged in limited exploration activities in Egypt, Yemen, Tunisia and Vietnam.

In its new avatar as ONGC Videsh, the company from mid-nineties re-oriented its focus on acquiring quality overseas oil and gas assets.. Realizing the associated necessity of  special empowerments, the Company was granted special empowerment by the Government of India in January 2000 whereby power to take investment decisions up to  ` 200 Crore was delegated to the Board of Directors of ONGC Videsh.  In addition, a fast track approval system was put in place for investments beyond power of the Board for approval by the Cabinet Committee on Economic affairs (CCEA) through Empowered Committee of Secretaries (ECS). The delegated authority of the Board was enhanced to ` 300 Crore or US$ 75 million, whichever is less, in February 2005. In 2011, the Govt. has upgraded the OVL Board to Mini Ratna (Category-1) status and in August 2012 it has been upgraded from Schedule ‘B’ to Schedule ‘A’. 

  

The special empowerment facilitated ONGC Videsh to successfully acquire oil and gas assets in foreign countries. ONGC Videsh, which had one asset in year 2000, gradually succeeded in competing with the best in the international arena, and could conclude many large transactions across the world in subsequent years.

Current Assets Portfolio 

OVL has  stake in 32 oil and gas projects in 16 Countries, Viz. Vietnam (2 projects), Russia (2 projects), Sudan (2 projects), South Sudan (2 projects), Iran (1 project), Iraq (1 project), Libya (1 project), Myanmar (2 projects), Syria (2 projects), Cuba (1 project), Brazil (2 projects), Nigeria (1 project), Colombia (8 projects), Venezuela (2 projects), Kazakhstan (1 project) and Azerbaijan (2 projects). OVL had ventured into midstream and had successfully completed 741 Km product pipeline project in Sudan in 2005. In March 2013, it acquired 2.36% stake in the BTC pipeline as part of its acquisition of stake in Azerbaijan.

OVL adopts a balanced portfolio approach and maintains a combination of producing, discovered and exploration assets. Currently, OVL has oil and gas production from 11 Assets, namely, Russia (Sakhalin-I and Imperial Energy), Syria (Al-Furat Petroleum Co.), Vietnam (Block 06.1), Colombia (MECL), Sudan (Greater Nile Petroleum Operating Company), South Sudan (Greater Pioneer Operating Company and Sudd Petroleum Operating Company), Venezuela (San Cristobal), Brazil (BC-10) and Azerbaijan (ACG). Imperial Energy, Russia (100% PI) is one producing asset operated by OVL while five assets namely GNPOC, Sudan; GPOC and SPOC, South Sudan; MECL, Colombia and Sancristobal, Venezuela are jointly operated.

Five Assets where hydrocarbons have been discovered and are at various stages of development as on 31st March, 2013 Viz. Petro Carabobo-1 Venezuela, Block 24 Syria, Block A1 & Block A3 Myanmar and Farzad B Iran,  of these, one is operated.

There are 14 Assets under various stages of Exploration out of which 8 exploration  acreages are operated by OVL, 2 are jointly operated and remaining 4 are non- operated.

New Horizons - RECENT Acquisitions 

OVL made three acquisitions in FY 2012-13. It acquired stakes of Hess Corporation subsidiaries in upstream and midstream assets in Azerbaijan on 28th March 2013. The assets include 2.7213% PI in Azeri, Chirag and deepwater Guneshli (‘ACG’) fields in the Azerbaijan sector of Caspian Sea. British Petroleum operates the fields on behalf  of  Azerbaijan  International Operating Company  (AIOC), a  consortium  of  BP (35.79% PI), SOCAR (11.65%), Chevron (1.1.27%), INPEX (10.96%), Statoil (8.56%), ExxonMobil  (8.0%), TPAO (6.75%), Itochu  (4..30%) and OVL (2.72%). OVL also acquired the 2.36% PI in Baku-Tbilisi-Ceyhan (‘BTC’) pipeline held by Hess. BTC Pipeline is operated by BP and owned by the consortium of SOCAR, Chevron, INPEX, Statoil, TPAO, ltochu, TOTAL, ENI and Conoco Phillips. ACG is the largest oil and gas field complex of Azerbaijan with 354 MMT of proven reserves as on 31st March 2013. The field produced 652, 000 barrels of oil per day in 2012-13.

OVL also acquired stakes in two exploration blocks in Colombia in 2012-13. Block GUAOFF-2 was acquired in Colombia Bid Round-2012 and the E&P Contract was signed on 3rd December 2012. The block is contiguous to OVL’s operated block RC-10 in Caribbean offshore and is spread over an area of 1171.34 SKM. Another block  Llanos 69 (LLA-69) was acquired in the same bidding round through Mansarovar  Energy Colombia Limited (MECL)  - a 50-50 joint venture company of OVL and Sinopec. It is an onshore block in the prolific Llanos basin of Colombia.

OVL in a 50:50 consortium with another Indian oil PSU (with OVL as the operator) has submitted the bid on 2nd April, 2013 for two shallow water blocks in Bangladesh namely SS-04 and SS-09. Both the blocks are awarded to the consortium and PSC initialed in September 2013 and signing is likely in October 2013.

ONGC Videsh Limited (OVL) and Oil India Limited (OIL) have signed definitive agreements on 25th June 2013 with Videocon Mauritius Energy Limited to acquire 100% of shares in Videocon Mozambique Rovuma 1 Limited, the company holding a 10% participating interest in the Rovuma Area 1 Offshore Block in Mozambique (Area 1) for US$ 2,475 million. The transaction is expected to close in the fourth quarter of 2013.

ONGC Videsh Limited (“OVL”) has signed definitive agreements on 24th August 2013 with Anadarko Moçambique Area 1 Limitada (“Anadarko”) to acquire a direct 10% participating interest (“Interest”) in the Rovuma Area 1 Offshore Block in Mozambique (“Area 1”) for US$ 2,640 million.

OVL assets as on 31st March 2013 are listed below in Table 1.

 Performance Highlights

OVL is the first Indian Company to produce equity oil and gas abroad. OVL’s production started in 2002-03 from start-up production of Block 06.1 in Vietnam in January 2003 and from Greater Nile Oil Project in Sudan in March 2003, aggregating a meager 0.25 MMToe in FY 2002-03. With sustained growth in production from its acquired assets, OVL registered the highest production of 9.448 MMtoe in 2010-11. This was followed by 8.753 MMTOE achieved in 2011-12, which translates to a Compound Annual Growth Rate (CAGR) of 10.75% till 2011-12. Adverse geo-political conditions in Sudan and South Sudan and force majeure situation in Syria has caused decline in oil production to a level 7.260 MMToe in 2012-13. Year-wise production of oil and gas from inception till 2012-13 is shown in Table 2 below.

Key Financials

Key financial performance of OVL in last three years are given as below:

(`. in million)

OVL’s cumulative investment up to 31st March, 2013 was USD 16.75 billion of which 73% has been financed through internal accruals.

Building Social Capital – Engaging with communities and Society 

Fulfilling social responsibility as a corporate citizen is part of the foundational ethos of Indian Public Sector Enterprises. OVL operates as responsible global corporate citizen by positively engaging with the communities and society where it operates.

OVL is committed to create a positive and lasting social impact by developing successful partnerships built on mutual trust and respect, ultimately raising the standard of living and the stability of the communities of the countries in which the Company operates. OVL makes valuable contribution in many ways e.g. through payment of tax revenues to governments; by investing in education and training and improving employment opportunities for nationals; providing medical/sports/agricultural facilities to the local community etc. Keeping in view the CSR guidelines issued by DPE, ONGC Videsh has framed CSR Policy for achieving the CSR objectives in all its overseas Projects / Assets. Budget of 0.5% of previous year’s Profit After Tax (PAT) or target as per MOU with ONGC, whichever is higher has been allocated towards CSR every year from financial year 2011–12 onwards. This budget allocation is non–lapsable. The Company spent ` 239 million and ` 208 million on CSR activities during FY’12 and FY’13 respectively.

OVERSEAS OFFICES

OVL has 22 overseas offices, located in HoChi Minh City (Vietnam),Yuzhno Sakhalinsk (Russia), Baghdad (Iraq),Tehran (Iran), Tripoli (Libya), Havana  (Cuba), Caracas (Venezuela), Astana & Atyrau (Kazakhstan), Bogota (Colombia), Damascus (Syria), Calgary (Canada) and Baku (Azerbaijan). ONGC Nile Ganga BV has its registered office in Amsterdam (Netherlands), in Khartoum (Sudan), Juba (South Sudan) and its subsidiaries have offices in Rio de Janeiro (Brazil) and Nicosia (Cyprus). ONGC Narmada Limited and ONGC Amazon Alaknanda Limited have their registered offices in Lagos (Nigeria) and Hamilton (Bermuda) respectively. Imperial Energy Limited has its registered office in Cyprus and its subsidiaries have offices in Cyprus, Moscow and Tomsk. Carabobo One AB has its registered office in Sweden. ONGC (BTC) Limited has registered office at Cayman Islands.

Competitive Strengths

OVL operates in highly competitive international oil and gas sector by competing with the best in the industry. Over the years, OVL has built inherent capabilities and expertise in its areas of operations. OVL has developed strong partnership alliance with a host of IOCs and NOCs including ExxonMobil, British Petroleum, Shell, ENI, Total, Repsol, Statoil, Chevron, Petrobras, Sodeco, Socar, Rosneft, Daewoo, Kazmunaigaz (KMG), Petro Vietnam, CNPC, Sinopec, PDVSA, Petronas and Ecopetrol. It has highly skilled human resource with excellent technical and management capabilities. The company has built facilities for evaluation, interpretation, economic modeling, FEED, design and execution of oil and gas projects and enjoys the technical and human resource support from ONGC. OVL has developed core expertise in due diligence, techno-commercial evaluations, bid negotiations and transaction documentations.

Looking ahead

OVL is focused to support India’s oil and gas security through overseas participation in oil and gas Exploration and Production activities. As per ONGC Group’s Perspective Plan 2030, OVL’s oil and gas production should increase from the existing level of 7.26 MMToe to 20 MMToe by 2017-18 and 60 MMToe by 2029-30.  This translates to a CAGR of 22.5% during 5 years till FY’18 and 9.5% during FY’18 to FY’30. 

The emerging industry landscape augurs well for the company as it evolves into a leading New Multinational Oil Company (NMOC). As a NMOC, the company is positioning itself to be a key ONGC growth vehicle by aiming for 60MMTOE production by 2030.

The target requires Producing/Developing acquisitions initially and then also on exploration acreage to yield additional 50 MTOE/ Year by 2030. This will involve substantial fund requirement and OVL may have to use full headroom of balance sheet of ONGC and OVL to finance these acquisitions coupled with equity and project financing. This entails acquiring, retention and training of manpower with specific skill sets and re organizing internal processes and systems in tune with future requirements.

Recognition and Rewards

OVL has been conferred with the prestigious ‘SCOPE Award for Excellence and Outstanding Contribution to the Public Sector Management’ for 2009-10. The award was presented by Dr. Manmohan Singh, Hon'ble Prime Minister of India on 31st January 2012. OVL has emerged as India’s most internationalized company based on the Transnationality Index (TNI) as per survey conducted jointly by Indian school of Business (ISB), Hyderabad and  Fundacao Dom Cabral  (FDC), Brazil.