OVL negotiates to get more acreage in Sudan

Vol 7, PW 20 (17 Dec 03) Exploration & Production

ONGC Videsh is looking at more opportunities in Sudan, not satisfied with purchasing Talisman Energys 25% stake in a producing oilfield and stakes in two exploration blocks from OMV of Austria.

PETROWATCH learns OVL is in talks to acquire part of the 11% stake held by two small private companies (one of which is believed to be UAE company Al Thani) in Blocks 3 and 7 (also in the Muglad Basin, adjacent to the Talisman and OMV stakes bought by OVL). Together, Blocks 3 and 7, known as the Melut and Adar Yel concessions, hold an estimated 1bn barrels or more in-place reserves.

Petronas and China National Petroleum Corporation own majority stakes in these blocks, and the Chinese company is operator. Current indications suggest oil production is expected to cross 10m t/y after 2005 while present production is estimated at 10,000 b/d.

Of the 11% minority stake, company X holds 6% and company Y (names are unconfirmed) holds 5%. On offer to OVL is about 49% of each companys participating interest.

Negotiations began sometime in June but agreement is still some time away. In dispute, as always, is the price.

Company X originally offered OVL 2.99% at the rate of $12m for each percent of its participating interest. In addition, it demanded that OVL carry it for its balance 3.01% till start of commercial production.

After much bargaining, OVL submitted a revised offer of $9m per one percent of participating interest as upfront payment and a pledge to carry the balance 3.01% at about 7% interest and some more payment in the form of oil when commercial production begins. Both sides are now close to a deal.

Company Y offered OVL part stakes in Blocks 3 and 7 in exchange for OVLs agreement to join it in one development and three exploration opportunities in another African country. OVL rejected this linkage and submitted an offer to company Y similar to its offer to company X.

We learn OVL plans to turn its attention to negotiations with company Y after it concludes a deal with company X. OVL also wants an equity stake in exploration Block 6 (also in the Muglad Basin) where CNPC is the operator and reserves are estimated at 1bn barrels.

On 29th November, Dow Jones said production from Block 6 would start at 60,000 b/d in the coming weeks.