OVL ready to walk away from Imperial assets

Vol 15, PW 23 (31 May 12) People & Policy

OVL seems strangely unconcerned that its Russia-based subsidiary Imperial Energy might soon be stripped of its E&P licenses for 16,800-sq km of Siberian acreage.

ONGC chairman Sudhir Vasudeva and OVL managing director DK Sarraf are yet to respond to a March 6 letter from Tomsk region department head of underground resources AV Komarov who is threatening to cancel the licenses for Imperial’s fields. “I am shocked OVL has not replied to this letter yet,” says a source close to the company.

“OVL’s silence is spoiling Imperial’s relationship with Tomsk government authorities.” Komarov, he adds, wants Vasudeva to explain why OVL has made no additional investment at its Siberian fields since December 2011.

Komarov learned of this from Imperial at review meetings held with all operators working in the region, one in December and the other in February. “The programme of exploratory works planned for 2011 was not entirely fulfilled,” writes Komarov.

“Such works are not being planned for 2012 at all.” Imperial currently produces 14,000 b/d of oil from 100 wells across the Maiskoye, South Maiskoye, Festivalnoye, Snezhnoye, Dvoinoye and Kiev-Eganskoye fields across 14 licenses.

By last December, it had drilled and completed 133 wells. But worrying forecasts suggesting production might dwindle to zero within the next three years led OVL’s board to reject Imperial’s $350m budget proposal, submitted last September, to drill 40 development and 11 exploration wells in 2012.

OVL has been sinking up to $200m/year into Imperial since 2009, as the company barely makes enough money to cover its operating costs. “If you want to exit a loss-making venture there are better ways,” we hear.

“Why unnecessarily antagonise local authorities”