Why ONGC is eyeing two oilfields in Venezuela; in talks with state-run oil company PDVSA, seeks US approval

Any acquisition would depend upon ONGC acquiring a licence from US authorities allowing it to function the two fields. (AI picture)

Oil and Pure Fuel Corp (ONGC) is reportedely in discussions with Venezuela’s state-owned oil producer PDVSA to buy both a portion or all of its holdings in two oilfields situated in the South American nation.Venezuela’s oil business has witnessed a protracted decline attributable to a mix of depressed oil costs, financial mismanagement and US sanctions. Throughout this era, PDVSA’s operational capabilities have additionally weakened significantly.Following the imposition of US oversight on Venezuela’s oil sector and the next easing of sanctions, Venezuelan crude has more and more returned to worldwide markets, with India rising as one in every of its main patrons.Via its abroad subsidiary, ONGC Videsh, the Indian company at the moment owns a 40% taking part stake in the San Cristobal oilfield, whereas PDVSA holds the remaining curiosity. Within the Carabobo-1 undertaking, ONGC Videsh has an 11% stake, with Indian Oil and Oil India every proudly owning 3.5%. Spain-based Repsol holds 11%, whereas PDVSA controls the remaining 71%.Individuals acquainted with the discussions informed ET that any acquisition would depend upon ONGC acquiring a licence from US authorities allowing it to function the two fields.Since Venezuelan President Nicolas Maduro was taken into custody in January, the USA has exercised efficient oversight of Venezuela’s oil business. Consequently, overseas firms are required to safe US approval earlier than working oilfields or dealing with crude gross sales and associated revenues.In accordance with the sources, ONGC has been partaking with the US Treasury Division to acquire the required permissions. Comparable licences have already been granted to a number of international power firms, together with Chevron, BP, Shell and Repsol, permitting them to conduct operations in Venezuela.The company is in search of to develop into the only real operator of the San Cristobal discipline and to share operational management of Carabobo-1 with Repsol, the report mentioned.ONGC has earlier indicated its readiness to make important investments in each belongings however has constantly sought better authority over operational choices and monetary administration. Buying PDVSA’s stakes, topic to securing the required US licence, would assist the company obtain these aims.Each the San Cristobal and Carabobo oilfields have skilled important declines in manufacturing, reflecting the broader deterioration of Venezuela’s oil sector. Present output ranges from the two belongings couldn’t be independently confirmed.In 2024, ONGC approached US authorities in search of sanctions-related approvals that may permit it to function the fields. On the time, Venezuela had agreed in precept to switch operational management of the belongings to ONGC, though no formal agreements had been executed, ONGC Videsh Managing Director Rajarshi Gupta mentioned in August 2024.Gupta had mentioned that when ONGC took over operations, manufacturing from the two fields might enhance from the then degree of 12,000-15,000 barrels per day to round 30,000 barrels per day inside a yr.He had additionally indicated that output might subsequently rise to 45,000-50,000 barrels per day over the next years. Such a rise would additionally help efforts to recuperate greater than $500 million in dividend funds which have remained pending for a number of years.Earlier, in 2017, PDVSA had proposed promoting a further 9% stake in the San Cristobal discipline to ONGC. The Indian company selected to not proceed with the acquisition, prioritising the restoration of dividend dues from the undertaking earlier than contemplating any enhance in possession.