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Frustrated with non-payment of dues, ONGC exits from Sudan

Sudan had denied ONGC and partners an extension of licence to operate block 2B after the initial contract expired in November 2016. OVL had, along with state-owned Oil India Ltd, constructed and financed a 741-km multi-product pipeline from Khartoum refinery to Port Sudan for USD 194 million.

PTI | New Delhi | Updated: 16-09-2020 13:05 IST | Created: 16-09-2020 12:50 IST
Frustrated with non-payment of dues, ONGC exits from Sudan
Representative image Image Credit: ANI

India's Oil and Natural Gas Corp (ONGC) has exited from Sudan oilfields after the African nation refused to pay for oil it lifted from the fields. ONGC Videsh Ltd (OVL), the overseas investment arm of the state-owned firm, as also its Chinese partner CNPC and Malaysia's Petronas have withdrawn from the block, a top company official said.

OVL had a 25 per cent stake in Block 2A&4 in Sudan while CNCP had 40 per cent and Petronet 30 per cent. Sudan's Sudapet had 5 per cent interest. Sudan had since 2011 not paid OVL and partners for oil it bought from the block. Sudan's dues towards OVL totalled USD 430.69 million, the official said.

The company initiated arbitration proceedings against the Government of Sudan to recover the dues and has terminated the Exploration and Production Sharing Agreement (EPSA), he said. OVL had also not been paid about USD 99 million for the 741-km-long pipeline it built from Khartoum to Port Sudan.

The project cost and rental of USD 254 million was to be paid by Sudan in 18 half-yearly equated instalments of USD 14.135 million each starting from December 30, 2005. The company got a total of 11 instalments (USD 155.48 million) till December 2010 and the balance seven instalments amounting to USD 98.94 million remained outstanding. The official said falling to get the balance payment even after using diplomatic channels, OVL has initiated a separate arbitration to recover the outstanding dues.

OVL had entered Sudan in 2003 by acquiring a 25 per cent interest in the Greater Nile Oil Project. GNOP consisted of the upstream assets of on-land Blocks 1, 2 and 4 spread over 49,500 sq km in the Muglad Basin, located about 780 km South-West of the capital city of Khartoum in Sudan.

Upon the secession of South Sudan from Sudan in July 2011, the contract areas of Blocks 1, 2 and 4 which straddle between Sudan and South Sudan were split with a major share of production and reserves are now situated in South Sudan. Post-secession, as the government of Sudan's share of total production from Sudan was not sufficient to meet the requirements of local refineries, foreign firms were asked to sell their share of crude oil to it.

However, the payment of dues on account of crude oil purchased by the government of Sudan was not received, the official said. Sudan had denied ONGC and partners an extension of licence to operate block 2B after the initial contract expired in November 2016.

OVL had, along with state-owned Oil India Ltd, constructed and financed a 741-km multi-product pipeline from Khartoum refinery to Port Sudan for USD 194 million. OVL's share of the project cost was 90 per cent, while the rest was borne by OIL.

The pipeline was handed over to the government of Sudan in October 2005. The lump-sum price, together with lease rent was required to be paid to OVL in 18 equal half-yearly instalments effective from December 2005. This amount totalled USD 254 million.

OVL has participating interest in 37 oil and gas projects in 17 countries spanning from Venezuela to Vietnam. The official said oil production at Block 1, 2 & 4 in South Sudan was shut in December 2013 due to security reasons and production is now being resumed.


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