OVL wants to dip into RIL payments to clear Venezuelean dues

The firm has now proposed two options -- either Venezuela offers it crude oil in lieu of the dues or adjustments are made with 300,000 to 400,000 barrels per day of crude oil being imported by RIL.

ONGC Videsh Ltd wants to dip into payments Reliance Industries makes for importing crude oil from Venezuela to recover $421 million (about Rs 2,610 crore) that the Latin American nation owes to it.

OVL, the overseas investment arm of state-run explorer Oil and Natural Gas Corporation, holds 40 per cent stake in the San Cristobal oil project in Venezuela.

It hasn't received dividend on its investment in the project that is operated by Venezuelan national oil company PdVSA since 2009 and total outstanding as on March 31, 2014 was $421 million.

To get back its dues, OVL first demanded staggered payments but Venezuela did not oblige, sources privy to the development said.

The firm has now proposed two options -- either Venezuela offers it crude oil in lieu of the dues or adjustments are made with 300,000 to 400,000 barrels per day of crude oil being imported by RIL.

Sources said OVL wants a mechanism to be put in place wherein part of the proceeds for payment of crude oil exported from Venezuela to India could be maintained in Indian rupees.

This, besides settling dues, could be used to pay for exports of other projects from India to Venezuela. This would encourage exports from India.

Sources said Cristobal project has already produced 94 million barrels of crude till March 2014.

The oil reserves are about 170 million barrels and the block is producing at the rate of about 34,000 barrels per day currently, down from 40,000 bpd earlier this year.

PdVSA holds 60 per cent stake and all authority and control of the project lies with it.

OVL does not have much say in the project.

Financial difficulties and inefficiencies of PdVSA have been affecting operation of San Cristobal as well as the giant Petro Carabobo oil Project where OVL has 11 per cent interest. Indian Oil Corporation and Oil India Ltd have 3.5 per cent stake in the project each.

Carabobo has 30 billion barrels of reserves and the project would require $25-30 billion of capital over next few years as the giant fields are brought to production.

Sources said OVL wants Venezuela to delegate all powers to the joint ventures operating the two projects.

Caracas currently controls all oil revenues that come from sale of Venezuelan oil, including from San Cristobal.

The OVL-PdVSA joint venture for the project is often not remitted oil sale proceeds, which has led to delayed payments to vendors and project execution schedule missing targets.

While Petronas of Malaysia had recently exited Venezuela, citing poor corporate governance of PdVSA, OVL wants to keep its engagements going in view of vast reserves of oil and gas that the Latin American nation holds, they said.

It hopes that the prevailing system would show an improvement in future.

Also, in case a company exits at this stage, the re-entry barrier would be very high.