With crude touching $140 per barrel and inflation touching 11.05 per cent, the Centre has intensified its drive to procure oil and gas assets abroad.
The United Progressive Alliance government is all set to give a green signal to ONGC Videsh (OVL) to invest $437 million in gas and oil assets in Brazil and Trinidad.
Three blocks, with huge potential for gas and oil reserves, would be acquired by OVL.
The Cabinet Committee on Economic Affairs (CCEA) is slated to consider a proposal on Thursday that allows OVL to acquire these gas and oil assets in Brazil and Trinidad & Tobago.
In the North Coast Marine Area2 (NCMA2) block off Trinidad coast, the hosts would hold 35 per cent participating interest, while ONGC Mittal Energy and OVL would hold the rest 65 per cent. The Indian companies will share participating interests in the ratio of 49:51, respectively.
On behalf of Trinidad, national oil company Petrotrin will hold the participating interest.
As per the proposal before CCEA, OVL will invest $155 million in the exploration block that is located in northern margins of offshore Trinidad in shallow waters. As per estimates, the block holds reserves worth 4.5 trillion cubic feet of oil and gas.
The government would consider the petroleum ministry’s proposal to invest another $310 million in the block once the first phase of exploration is completed. This will allow OVL to control 30 per cent of oil assets in the block against 10 per cent initially.
CCEA will consider another proposal to invest $282 million in the two Brazilian blocks.
In both the blocks, India proposes to hold 100 per cent participating interest. But the government is considering the option of allowing OVL to divest a part of its interest in the block to spread the risks in favour of a regional player.
One Brazilian block in Espirito Santos basin, spread over 725 sq km, is likely to have estimated reserves worth 5.9 trillion cubic feet. The second block is in shallow waters with estimated reserves of one billion barrels of crude.
The only hitch is that the proposed investment and financial guarantees have been proposed even though ONGC ‘s exposure in its subsidiaries and overseas arm has crossed 42 per cent of its total net worth.
As per existing norms, no navaratana company can invest more than 30 per cent of its net worth in its subsidiaries.
The petroleum ministry has justified the breach of investment limit with the contention that both domestic and offshore borrowings have become expensive. And all the internal accruals of ONGC are set aside only for investments in oil and gas assets in domestic and international markets.
The finance ministry and the Planning Commission, according to officials, are in favour of mopping up funds from ‘external sources’ by taking recourse to project financing.
By doing so, ONGC and OVL would mean higher capital efficiency, ensure risk sharing and independent evaluation of the project.

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