ONGC Mittal Energy Ltd - JV of ONGC Videsh and Mittal Investment Sarl - had in 2005 won exploring rights in OPL-279 and OPL-285 blocks after committing to invest $6 billion in an 180,000 barrels per day greenfield refinery, a 2,000 MW power plant or a railway line from east to West of Nigeria.
It paid a signature bonus of $50 million for OPL-285 and $75 million for OPL-279.
At the end of the first phase last year, OMEL has relinquished one of the blocks (OPL 279) while in another, OPL 285, it is willing to go ahead only if the Nigerian government would waive the requirement to set up attendant downstream facilities, official sources said.
Initial exploration has established only sub-optimal quantities of hydrocarbons in both the blocks and OMEL is reluctant to enter Phase-II as downstream investments attached to it impose unsustainable financial burdens, they said.
As per the MoU for the blocks, the Nigerian government was to offer OMEL 120,000 barrels a day (6 million tons a year) crude oil lifting rights on a commercial basis, two deep water exploration blocks that would attract a signature bonus structured to reflect an appropriate carried participation in a proposed 180,000 bpd refinery and assurances of LNG off take.
Further, upon commercial discoveries of hydrocarbons in the two blocks and assured uplift of crude, the Indian combine would invest $6 billion in Nigeria on construction of railways, 2000 MW coal/gas based power plants, commercial agriculture and upgrade the Petroleum Training Institute in Delta State.
The Nigerian Government had the right to decide the order of priority.
However, the downstream commitments have not been stuck to and OMEL has therefore requested the Nigerian National Petroleum Company (NNPC) for waiver of investment obligations attached to PSC of the blocks for entering into Phase-II, the sources said.
This downstream commitment has been found to provide a negative return as per a study conducted by Foster Wheeler on behalf of OMEL.
In November 2008, OMEL had got French energy major Total as technical partner offering 25.67 per cent and 14.5 per cent stakes in deep offshore licence OPL-285 and OPL-279 respectively. The Nigerian company EMO Exploration and Production is also partner on both of the blocks.