As India’s dependence on crude oil imports continues to rise, state-run ONGC Videsh Ltd. (OVL) is increasingly looking to acquire oil and gas acreages abroad. It is targeting assets from Latin America to Far East Russia.

“We are aggressively looking at acreages, both exploration as well as producing properties, in several geographies,” said S.P. Garg, managing director for OVL.

After winning two onshore blocks—B2 (Zebyutaung-Nandaw) and EP-3 (Thegon-Shwegu)—in Myanmar’s 2013 onshore bidding round, OVL's overseas arm is holding talks with a global major to acquire a stake in a deepwater block in Myanmar.

“We had a pre-bid understanding with an international oil company that if we were to win any shallow-water acreage, they will farm-in. Similarly, [if the] company was successful in picking up any of the deep-sea acreages it bid for, we would get a stake,” Garg said without disclosing the name of the other company.

He said OVL could get up to 49% participating interest (PI) in the deepwater oil and gas block won by the international company.

OVL is also looking at Kazakhstan’s offer to sell 25% PI in the Abai Block in the Caspian Sea. The block, which is adjacent to the Satpayev Block, is estimated to hold 2.8 Bbbl of oil reserves. The Indian firm is carrying out a study to assess the recoverable oil and gas reserves from the Abali block and the possibility of operational synergies in developing the two blocks.

Vietnam has offered OVL five offshore oil and gas blocks which lie outside the territory claimed by China in the South China Sea without competitive bidding. Seismic data from these blocks is being assessed beforehand.

In February, OVL and state-run Oil India Ltd. signed separate production-sharing contracts with Petrobangla for the exploration and development of two shallow-water exploration blocks, SS-09 and SS-04, off the Bay of Bengal in Bangladesh. The two companies each have a 45% stake in the two blocks. The remaining 10% stake is to held by Bangladesh Petroleum Exploration and Production Co. Ltd. (Bapex).

Strategy

The Indian company is aiming to acquire oil and gas acreage that would help to increase its production by eight times to 60 million tons of oil equivalent (MMtoe) by March 2030. To reach the goal, OVL needs to achieve a production target of 20 MMtoe by 2017-2018 (ending March 31, 2018) and 60 MMtoe by 2029-2030, from the current level of around 8 MMtoe, according to the ONGC Group.

“As the production targets are quite steep involving a CAGR of more than 22% from FY13 to FY18 and more than 9% from FY18 to FY30, the company needs to concentrate on acquiring assets under development and production phases initially and then concentrate on high potential exploration acreages and also venture capitalist type of opportunities,” the company said in its latest annual report.

The plan focuses on:
• Building a balanced portfolio of producing, discovered and exploration assets as well as conventional and non-conventional assets in risky and politically stable countries. When acquiring producing properties, emphasis would be given to exploratory efforts that increase production;
• Investing in unconventional energy resources which have been commercially developed, such as shale gas, heavy oil and oil sands.
• Partnering with global companies to create value and share knowledge to development new assets. Alliances through agreements and joint ventures would be encouraged.
• Consolidating the company’s position in the regions or countries where it is already present while attempting to enter other hydrocarbon-rich areas.

OVL has already set up a data center and formed a team identify value in the existing exploration assets and new opportunities.

So far, the company has acquired stake in 34 oil and gas assets in 17 countries, which spread from Columbia to Siberia. Of these, 11 projects are producing and five are discovered and under development assets. The remaining 14 projects are at various stages of exploration.

New assets

OVL is bullish on its recent acquisitions that include the Rovuma Area-1 Block offshore Mozambique and the Azeri, Chirag and deepwater portion of the Guneshli (ACG) fields in Azerbaijan. The company believes that these projects will help it reach its long-term production target of 60 MMtoe by 2030.

OVL and two other Indian state-run companies—Bharat Petroleum Corp. Ltd. and Oil India Ltd.— jointly have a 30% participating interest in Rovuma Area 1 Block, which is estimated to hold reserves of more than 2.25 Tcm (75 Tcf). Operator Anadarko Petroleum Corp. holds 26.5%; ENH, 15%; Mitsui & Co., 20%; Bharat Petroleum Corp. Ltd., 10%; and PTT Exploration and Production, 8.5%.

After spending $4.12 billion for a 16% stake in Area 1 in two stages, ONGC Videsh alone has lined up an investment of another $3 billion for its share of the cost of producing gas from the field and setting up liquefaction trains. The partners would initially develop the first set of discoveries in Area 1 block and liquefaction facility with four trains of 5 million tons per year with an estimated investment of $8.5 billion. The Indian company’s share of that comes to around $2.95 billion.

In 2013, OVL acquired Hess Corp.’s 2.7213% participating interest in ACG in Azerbaijan sector of the Caspian Sea and 2.36% interest in the Baku-Tbilisi-Ceyhan pipeline (BTC). BP operates the fields on behalf of Azerbaijan International Operating Co. (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%) and Itochu (4.30%).

ACG is Azerbaijan’s largest oil and gas field complex. The field produced 32.2 million tons of oil in 2013.

AIOC plans to invest $2 billion to develop the ACG fields this year, which include drilling 19 wells and completing the construction West Chirag platform.

For the current fiscal year, OVL has earmarked about $2.46 billion to invest in its overseas assets. It set a production target of 5.384 million tons of crude and 2.768 Bcm (98 Bcf) of gas this year. In 2013-14, the company increased crude oil production by 26% to 5.491 million tons on the acquisition of a 12% stake in a Brazilian field and 2.7% in the ACG complex.

However, civil wars in South Sudan and Syria have affected production in the oil and gas assets it holds. The company’s properties in South Sudan, which produced 45,000 bbl/d, has been shut since December. The fields in the Al Furat Block, with a capacity between 70,000 bbl/d and 80,000 bbl/d, in Syria have not produced any oil for the last two years.