Decade long payment default finally pushes ONGC out of Sudanese oilfield

After facing years of payment default, the country’s largest oil and gas explorer Oil and Natural Gas Corporation has finally exited from Sudanese oilfields, relieving itself of yet another toxic overseas asset.

Company sources said that all the three overseas investors in the Sudanese oilfield including ONGC Videsh Ltd (OVL), the overseas investment arm of the state-owned firm, Chinese entity CNPC and Malaysia’s Petronas have now withdrawn from the block.

The OVL had a 25 per cent stake in Block 2A&4 in Sudan while CNCP had 40 per cent and Petronas 30 per cent. Sudan’s Sudapet had 5 per cent interest.

The OVL has been operating the block of Greater Nile Oil Project in Sudan along with partners CNPC and Petronas since 2003. But, Sudan has not paid all the partners for the oil bought since 2011 that had built up millions of dollars of dues with OVLs share itself coming to over $ 400 million.

Not only the payment for the oil, OVL has also not been paid for the pipeline it built connecting the oilfield to Port Sudan.

Sources said with diplomatic channels also being exhausted to resolve the issue, OVL has now initiated arbitration proceedings against the Sudanese government and has exited from the exploration and production agreement for the oilfield.

OVL had in 2003 bought 25 per cent stake in the Greater Nile Oil Project (GNOP) comprising Block 1, 2 and 4 in the undivided Sudan. It lies in the prolific Muglad basin, about 780 kms in the South-West of Khartoum, the capital of Sudan. The project produces about 50,000 barrels of oil per day.

Upon secession of South Sudan from Sudan in July 2011, the contract areas of blocks 1, 2 and 4, spread over both areas, were split with a major share of production and reserves now situated in South Sudan.

Blocks 2A, 2B and 4N are in Sudan, and blocks 1A, 1B as well as 4S are in South Sudan.

Block 2B produces 28,000 bpd of oil while Block 4 is in the exploration phase.

Sudan has not paid OVL for the oil from GNOP it consumed. Post secession, as the Sudanese government’s share of the total production in Sudan was not sufficient to meet the requirements of the local refineries, foreign firms were asked to sell their share of crude oil to it.

However, the payment on account of crude oil purchased by the Sudanese government has not been received.