Venezuela delays may mar India’s energy security efforts .

New Delhi: In what may impact India’s energy security efforts, production from two oilfields in Venezuela’s Orinoco petroleum belt, which was won by local firms in a joint bid, is likely to be delayed.

The global grouping that won the bid in 2010 includes Indian Oil Corp. Ltd (IOC), ONGC Videsh Ltd (OVL), Oil India Ltd (OIL), Spain’s Repsol YPF SA and Malaysia’s Petroliam Nasional Bhd (Petronas).

According to earlier estimates, production from the multi-billion integrated oil project in the Carabobo 1 Norte and Carabobo 1 Centro blocks was to start by June 2014, with an output of 90,000 barrels per day (bpd) of oil by December 2014. However, the project that has estimated oil reserves of 27 billion barrels is running behind schedule.

“The project is behind schedule and not up to the mark. There have been delays in placing orders and execution. There is red-tapeism there. The current test production is of around 2,000 bpd. The target was to reach 90,000 bpd by 2014,” said an executive with one of the Indian state-owned firms. He spoke on condition that neither he nor his firm be named.

The fields are key to OVL’s hopes of acquiring 20 million tonnes per annum (mtpa) of capacity in overseas assets by 2020. OVL, Respol and Petronas each hold an 11% share in the joint venture, and IOC and OIL hold 3.5% each. The remaining 60% stake is owned by Corporación Venezolana del Petróleo, a unit of state-owned Petróleos de Venezuela SA (PDVSA). The total investment made by the consortium partners is expected to be around $13.63 billion.

Overseas companies find it tough to do business with PDVSA in oil-rich Venezuela, experts say.

“PDVSA aspires to develop natural resources in competition with transnational companies and defend in all areas the collective interest as a company owned 100% by the republic,” said Deepak Mahurkar, leader, oil and gas at PwC India, a consultancy. “The strategy is to move from being in a contract administrator role in the late eighties to owning and operating the reserves by Venezuelans.”

The delay comes against the backdrop of India’s efforts to reduce its dependence on imports to meet its energy demand. India, the world’s fourth largest energy-consuming nation after the US, China and Russia, accounts for 4.4% of global energy consumption.

Vice-president Nicolas Maduro won a controversial presidential election against Henrique Capriles, governor of Miranda state, after the death of president Hugo Chávez. The Venezuelan government has been under criticism for using PDVSA as a political tool.

Indian state-owned companies such as OVL, IOC and OIL were concerned about their investments in oil-rich Venezuela in the aftermath of Chavez’s death, Mint reported on 8 March.

D.K. Sarraf, managing director of OVL, declined to comment.

“One should expect such kind of delays when one is dealing in Venezuela and PDVSA,” said another executive with one of the Indian firms that is part of the consortium. He too declined to be named. “They haven’t even paid dividends for OVL’s share in the San Cristobal oil exploration project.”

While Venezuela has emerged as an important source of crude imports for India, OVL is still awaiting unpaid dividends of at least $155.5 million from Venezuela’s San Cristobal oil exploration project as Chavez’s government had appropriated earnings from state-owned PDVSA to finance social spending. Apart from trying to get its dues, OVL wants its capital expenditure to be offset against this pending amount.

PDVSA couldn’t be reached for comments.

The consortium is now trying to work out a plan to meet the earlier stated targets. It is a tough task, as according to the earlier estimates, the blocks are expected to hit the peak production of 400,000 bpd by end 2017. The consortium has a licence to develop the fields for 25 years, which can be extended by another 15. Half of the heavy crude will be upgraded to light crude.

The latest development also comes even as OVL’s $2.1 billion acquisition of a stake in Imperial Energy’s Siberian deposits is not yielding the desired results as the initial projections estimated.

Even the Comptroller and Auditor General of India had faulted the acquisition of Imperial Energy Corp. Plc. and said the company incurred a loss of Rs.1,182.14 crore between January 2009 and March 2010 due to its inability to achieve the estimated oil production of 35,000 bpd.

India’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) now to around 1,500 mtoe, according to the oil ministry. Till now, state-owned firms have invested Rs.64,832.35 crore on overseas energy assets, ministry data show.

Source : livemint.com