KOLKATA (miningweekly.com) - India’s ONGC Videsh Limited (OVL), the overseas arm of oil exploration and production major Oil and Natural Gas Corporation (ONGC), would resume production from its oilfields in Sudan by June 2013.

According to an ONGC official, the Indian government has been approached by OVL to intervene on a bilateral basis with the governments of Sudan and South Sudan to resolve issues of transit fees payable for evacuation of production from the oilfields.

The internal strife in Sudan followed by the secession of South Sudan in 2011, forced the division of oilfields operated by OVL and its partners through the Greater Nile Petroleum Operating Company (GNPOC), to suspend operations.

GNPOC, which was producing about 85 000 bbl/d, was forced to shut operations in early 2012, following disputes between the two governments of Sudan over pipeline transit fees payable by the oilfield operator.

ONGC officials said that while the dispute between the governments of Sudan and South Sudan was resolved, the transit fees levied on GCPOC were exorbitant, making operations of the oilfields unviable.

As per an agreement between governments of Sudan and South Sudan, GNPOC would have to pay $8.40/b in pipeline transportation fees, a processing fees of $1.60/b and an additional $1/b for transport of oil from South Sudan to Sudan, which officials said were too high and forced the operators to shut down production in the fields.

Indian Government Negotiating with Sudan Governments

It was learnt that India’s Petroleum and Natural Gas Ministry, in consultation with the External Affairs Ministry, had already initiated talks with the governments of Sudan and South Sudan and that the Indian government and OVL were hopeful of reaching an agreement on transit fees following positive signals emanating from the talks.

It has been pointed out by the Indian side that OVL had invested close to $2.5-billion in oil assets in Sudan and it was not in the interest of either Sudan, South Sudan or India to jeopardise foreign investments and risk bilateral relations.

The options being considered was to resume production at the earliest even as negotiations on transit fees continued, or to levy transit fees on oil transportation to ports for exports but to exempt these exports from transit fees between fields in Sudan and South Sudan.

Post the division of Sudan, GNPOC’s oil blocks 1, 2 and 4 were spread across both the countries while Block 5A was entirely located in South Sudan. GNPOC also had allied infrastructure projects in the region including a 1 504 km pipeline connecting the disputed Heglig region to Port Sudan on the Red Sea coastline.

India’s OVL has a 25% equity stake in GNPOC, with China National Petroleum Corporation holding a 40% stake, Petronas Malaysia 30% stake, and the Sudanese national oil company owning a 5% interest.