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State-run Oil and Natural Gas Corporation (ONGC) is set to step up its activities in Venezuela after receiving a licence from the US Treasury's Office of Foreign Assets Control (OFAC), removing the sanctions-related restrictions that had limited the company's operations in the country.
The approval could allow ONGC to put more money into its Venezuelan assets, raise oil output, work on fresh agreements and potentially take over the operation of some projects currently managed by Venezuela's state-owned oil company PDVSA. Anupam Agarwal, Director-Finance at ONGC, said the company now has greater flexibility to work on its Venezuelan investments. "Now we have full freedom to work on the Venezuela project because earlier we were restricting our operations there because of the sanction-related risks. Those risks are behind us," Agarwal said during an investor call following the company's first-quarter earnings announcement. The new licence is also important from a financial perspective. It will allow ONGC to handle the finances linked to its Venezuelan projects and could help the company recover a pending dividend of more than USD 500 million. ONGC has been discussing its Venezuelan investments with the country's authorities and its joint-venture partners. According to Agarwal, the company expects progress on new agreements and is also considering taking over operatorship of some projects from PDVSA. For several years, US sanctions on Venezuela's oil sector had made it difficult for ONGC to carry out financial transactions, invest and expand operations in the country's energy sector. The restrictions had forced the company to keep its activities limited despite its existing presence there. Venezuela's large oil reserves make the country strategically important for ONGC. According to the information shared by the company, Venezuela has around 303 billion barrels of proven crude oil reserves, the largest in the world. However, production has remained below potential because of years of underinvestment, sanctions and operational challenges. The investment case could also get a boost from Venezuela's newly enacted petroleum law, which provides additional fiscal incentives for resource development. Agarwal said ONGC is particularly focused on shallow and onshore fields in the country, where it has experience from its operations in western India. "ONGC's focus is on shallow, onshore fields in Venezuela, where it has relevant operating expertise from its domestic fields in Western India, including Mehsana and Ahmedabad," he said. The company is now looking to make greater use of its existing expertise as restrictions on its Venezuelan operations ease. "We are very bullish for Venezuela," Agarwal said, adding that ONGC expects new agreements and could potentially take over operatorship of some projects from PDVSA in the near term. (ANI)
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