The government on Friday gave Oil and Natural Gas Corp and partners approval to invest $2.181 billion in a giant oilfield in Venezuela that will give energy deficient India 3.6 million tonnes a year of crude oil.
The Cabinet Committee on Economic Affairs approved the investment by Indian firms who together hold 18 per cent stake in the Carabobo-1 project, Home Minister P Chidambaram said after the CCEA meeting here.
The Carabobo-1 project of the Orinoco extra-heavy oil belt of Venezuela would involve a total investment of close to $21 billion over 25 years. The three firms have for the time sought the government's approval for investing $2.18 billion and may be able to fund most of the future investment from the revenues they will start earning when the project goes on-stream in three years.
Last month, the three won rights to develop Carabobo-1 project along with Spain's Repsol-YPF and Petronas of Malaysia after committing themselves to pay a signing amount of $1.05 billion and an equivalent to Venezuela's state-run PdV in loan.
Repsol-YPF, OVL and Petronas will each hold 11 per cent stake in the 'Mixed Company' that will develop Carabobo-1, with seven per cent being split between IOC
The project will give India 3.6 million tonnes of crude oil annually out of the envisaged output of 400,000 barrels a day. Chidambaram said OVL's investment of $1.33 billion from 2010 to 2015 is made up of $302 million in equity, $289 million in loan of PdV, $454 million as contribution to Mixed Company as debt and $289 million as signature bonus.
IOC and OIL's exposure of $424 million each is made up of $96 million in equity contribution, $92 million in loan to PdV, $144 million as contribution to Mixed Company by way of debt and $92 million as signature bonus.
The Carabobo-1 project, comprising Carabobo-1 Central and Carabobo-1 North blocks, would develop extra-heavy crude production capacity of up to 400,000 barrels per day (20 million tonnes a year). Early output of at least 50,000 bpd is slated to start in 2012-13, rising to peak in 2016.
The project, he said, would give Indian firms a minimum return on capital of 13.8 per cent.
The project investment of $21 billion includes $12.8 billion cost of constructing a heavy crude upgrader that can turn Orinoco's tar-like oil into valuable synthetic crude.
The 200,000-bpd upgrader may be built at Soledad in Anzoategui state to make synthetic crude of 32 degree API or higher by 2015-16.
Since signature bonus is to be paid by only foreign firms, the share of OVL, IOC and OIL would be $472.5 million or 45 per cent of $1.05 billion. They will also contribute a similar amount to PdV as their share of credit.