ONGC To Invest $200 Million To Revive Venezuela's San Cristobal Oilfield

Oil and Natural Gas Corp (ONGC) plans to invest around $200 million to revive production at its San Cristobal oilfield in Venezuela, where output has declined to nearly a tenth of its peak level over the years due to US sanctions and poor management by Venezuelan state oil company Petróleos de Venezuela, S.A. (PDVSA), according to people familiar with the matter.

The company's overseas arm, ONGC Videsh Ltd, has secured a licence from the United States to operate the field and is close to finalising an investment plan with PDVSA, which holds a 60% participating interest in San Cristobal, while ONGC holds the remaining 40%.

ONGC share price was down 0.55% at ₹232.72 as of 12:12 PM on 26 August.

Investment Plan And Production Targets

Under the proposed arrangement, ONGC will also fund PDVSA's share of the investment and recover the amount from the field's future output, sources said. The total planned outlay of $200 million, which includes PDVSA's portion, is expected to be deployed over the next 12 months or so.

San Cristobal is currently producing between 4,000 and 5,000 barrels per day, and ONGC aims to substantially increase this, with the eventual target of restoring output to its earlier peak of 45,000 to 50,000 barrels per day.

Regulatory Backing For Venezuela Operations

According to ONGC's latest annual report, ONGC Videsh has been granted a specific licence by the US Office of Foreign Assets Control (OFAC), allowing it to continue operations, investments and marketing of production from its Venezuelan assets.

The licence also permits the company to acquire additional participating interests and pursue new oil and gas opportunities in Venezuela, which the company said would strengthen its international operations and growth prospects.

Talks Also Underway On Carabobo-1 Field

ONGC had earlier been reported to be in discussions with PDVSA to acquire all or part of its stake in two Venezuelan oilfields, San Cristobal and Carabobo-1.

ONGC Videsh currently holds an 11% participating interest in the Carabobo-1 field, with the remaining stakes held by Indian Oil at 3.5%, Oil India at 3.5%, Spain's Repsol at 11% and PDVSA at 71%.

ONGC has made limited progress so far on acquiring additional interests in either field and has not yet firmed up an investment plan for Carabobo-1, according to people aware of the matter.

Dividend Recovery Also On The Agenda

Once production at San Cristobal is revived, ONGC is also looking to recover more than $500 million in oilfield dividends that have remained stuck in Venezuela for several years.

Venezuela's overall oil production has declined over time due to a combination of low oil prices, economic mismanagement and US sanctions, with PDVSA's operational capacity steadily weakening.

Following political developments in the country earlier this year, the United States has exercised greater control over Venezuela's oil sector, requiring foreign companies to obtain US licences to operate oilfields and manage oil sales and revenues.

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