As sanctions return to Venezuela, OVL has a problem on its hands

The six-month sanctions waiver ended on Friday with no progress on the oil-for-dividends plan agreed between the two countries. US officials have now indicated that the sanctions will return.

OVL is looking at viable options to secure the crude oil, and its legal and marketing teams have been put into actionforthesame, a person aware of the matter said.

“It would take time for Venezuela to send oil. The production capacity of the country has also declined over the years of sanction which need to be rejuvenated. The likelihood of another sanction raises concern whether these cargoes would actually get delivered,” the person said on condition of anonymity.

Venezuela’s state-run energy monopoly PdVSA owes about $600 million in dividends to OVL, which owns 49% stake in the operational San Cristobal project, and 11% in Carabobo, which is under development.

In January, Mint had reported that OVL is in talks with its Venezuelan partner PdVSA to secure oil cargoes for settling the long pending dues to the ONGC arm.

In response to a query, an OVL spokesperson said: “Our legal and marketing teams are working on the issue,” adding the company would revert after a clear picture emerges.

Queries sent to the Union ministry of petroleum and natural gas and Petroleos de Venezuela S.A. (PdVSA) remained unanswered till press time.

The US, which had briefly lifted sanctions on Venezuela’s oil sector in October, is planning to revive them over Venezuelan president Nicolas Maduro’s failure to hold free and fair elections.

The return of sanctions may also impact OVL’s plans to get operatorship of the two Venezuelan projects. OVL managing director Rajarshi Gupta had said in February that the company would look at investing more in the country to increase productivity.

“The lifting of the sanctions is a very positive sign. We are in very advanced discussions with the government of Venezuela to get further cargoes to liquidate our dividends and at the same time to get the operatorship of the two projects that we have there and increase the production from there. The two projects we will have to invest to get more production. That’s still being worked out. We will have to invest, because Venezuela has the largest reserves in the world. So, if we invest more, we will get more production,” he had said.

Currently, OVL and PdVSA jointly operate the projects. OVL acquired 40% in San Cristobal project in Venezuela in 2008, with PdVSA owning the balance 60%. ONGC Videsh holds the stake through ONGC Nile Ganga (San Cristobal) BV, a wholly owned subsidiary of ONGC Nile Ganga B.V.