Another world-class asset for OVL's portfolio

Vol 6, PW 9 (03 Jul 02) People & Policy

WHEN THE TALISMAN deal goes through, OVL will take full control of the Netherlands-based Talisman subsidiary TGN BV, which manages the Sudan stake.

All the positions that Talisman holds in the project, such as head of the joint operation committee and chief financial officer, will revert to ONGC. Unlike Sakhalin, OVL is buying into a world-class producing field, not an exploration asset.

The Greater Nile Oil Project covers an area of about 12.2m acres in the Muglad basin, a 1,504 km pipeline from the fields to Port Sudan on the Red Sea, six pumping stations and a 2m-barrel storage terminal. It holds two development blocks, discovered by ChevronTexaco and Shell and three exploration blocks.

Production is from 101 wells in nine fields. Another field, Munga, will begin production shortly.

There are 16 discoveries made, but only some have been tested. Production began in 1999 and today the asset produces around 250,000 b/d.

Consultants SGS have graded the crude at 33-42 degrees API with 0.5% sulphur. Ninety percent of the crude produced is bought by Australia, China, Japan, Korea, Indonesia, Singapore and Taiwan.

The rest is sold in Europe. No doubt Indian refiners will soon be queuing up for some too.

Gaffney Cline & Associates tells OVL reserves from the field range from a low of 940m barrels to a high of 1.47bn barrels. OVL 's financial assessment of the project - at $19 per barrel Brent - revealed the following.

Discount rate 12% 14% 16% 18% 20% Reserves: 1bn barrels (discovered fields + 39 prospects) Figures in $ million Brent variance: -10% 721 664 614 570 531 Crude price: $19/barrel 851 785 727 676 630 Brent variance: +15% 971 898 834 777 727 OVL is targeting a minimum 14% rate of return on its investment. We understand the payback period for OVL will range from five to seven years depending on how much it pays Talisman.

This will also be the first time ONGC partners the Chinese, Sudanese and Malaysian national oil companies in an overseas upstream project.