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AsianOil SOUTH ASIA AsianOil

OVL ready to quit Sudan

With Khartoum failing to meet financial obligations and the amount of
oil involved remaining small, the Indian company has little reason to stay

COMMENTARY ONGC Videsh Ltd (OVL), the foreign pro- oil from the Sudanese portion of the blocks and
jects arm of India’s state-run Oil and Natural to transport their production to market via the
Gas Corp. (ONGC), has decided to with- pipeline they had already built to Port Sudan.
WHAT: draw from Sudan. They changed course, though, after determin-
India’s OVL is reportedly Sources inside the company told the Indian ing that Sudan’s share of production from Blocks
preparing to exit the press last week that the move to exit Greater Nile 2A, 2B and 4N would not keep local refineries
GNPOC project. Petroleum Operating Co. (GNPOC) stemmed running at capacity. Specifically, they asked OVL
from long-running financial disputes with the and the other investors in the project to sell their
WHY: Sudanese authorities. Those disagreements, in shares of oil production to Khartoum.
Khartoum has not upheld turn, are rooted in the project’s history. This request drew a positive response, at least
its pledge to compensate initially. However, GNPOC’s shareholders say
the company for its oil Downhill path they have never been paid for their oil. Accord-
production or for its past THE Indian company holds a 25% stake in ing to the sources inside the Indian company,
construction work on a GNPOC, which is developing Blocks 2A and OVL’s share of overdue payments for this crude
pipeline to Port Sudan. 4N in the Muglad Basin in southern Sudan. It now amounts to nearly $431mn.
entered the consortium in 2003, eight years
WHAT NEXT: before South Sudan gained independence from Overdue payments
Sudan may experience Khartoum. At the time, GNPOC controlled Additionally, the sources say, Khartoum owes
another round of fuel three sites known as Blocks 1, 2 and 4. In 2011, OVL another $99mn. This sum, they explained
shortages if GNPOC’s though, the licence area was split between Sudan last week, represents the Indian firm’s outstand-
members quit. and South Sudan. ing share of the cost of building the 741-km sec-
As a result of that split, most of the oil-bearing tion of a pipeline from Khartoum to Port Sudan.
areas ended up in the South Sudanese portion, Sudanese authorities had originally pledged
which consists of Blocks 1A, 1B and 4S. The to provide OVL with a total of $254mn as com-
other sections, consisting of Blocks 2A, 2B and pensation for 90% of project costs and rental fees.
4N, remained in Sudan’s hands. They said in 2005 that they would make up that
OVL and the other partners in the group sum by 18 payments of $14.135mn each, with
have been at odds with Sudanese authorities ever the first payment to be submitted on December
since. Officials in Khartoum had anticipated that 30 of that year, and subsequent payments to be
members of GNPOC would continue to extract made every six months.

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