Oil extraction pipes emerge from the water at an oil platform in Spain (Photographer: Angel Navarrete/Bloomberg)

ONGC Videsh Drags Sudan To Arbitration To Recover $400 Million

ONGC Videsh Ltd., India’s flagship overseas oil investment firm, has dragged Sudan to an international arbitration court to recover over $400 million in unpaid oil dues pending since 2011.

OVL, the overseas arm of state-owned Oil and Natural Gas Corp., has filed an arbitration claim in a London court to recover about $300 million for oil Sudan bought from its Greater Nile Oil Project and another $98.94 million in unpaid pipeline rent lease, people familiar with the matter said.

OVL had in 2003 acquired 25 percent interest in the Greater Nile Oil Project in Sudan. China National Petroleum Corporation holds 40 percent stake in the project, while Malaysia's Petronas has 30 percent and Sudapet of Sudan own remaining 5 percent.

GNOP consisted of the upstream assets of on-land Blocks 1, 2 and 4 spread over 49,500 sq km in the Muglad Basin, located about 780 km South-West of the capital city of Khartoum in Sudan.

The crude oil produced from oil field of GNOP is transported through a 1,504-km pipeline to Port Sudan at the Red Sea.

Upon the secession of South Sudan from Sudan in July 2011, the contract areas of Blocks 1, 2 and 4 which straddle between Sudan and South Sudan was split with a major share of production and reserves are now situated in South Sudan.

Post-secession, as the government of Sudan's share of total production from Sudan, was not sufficient to meet requirements of local refineries, foreign firms were asked to sell their share of crude oil to it.

However, the payment of dues on account of crude oil purchased by the government of Sudan has not been received, sources said, adding that OVL’s share of the outstanding dues is about $300 million.

OVL’s share of oil production from GNOP, Sudan was 0.5-0.7 million tonnes.The company had along with state-owned Oil India Ltd. constructed and financed a 741-km multi-product pipeline from Khartoum refinery to Port Sudan for $194 million.

OVL's share of project cost was 90 percent, while the rest was borne by OIL.The pipeline was handed over to the government of Sudan in October 2005. The lump sum price, together with lease rent was required to be paid to OVL in 18 equal half yearly installments effective from December 2005.While payment of 11 half-yearly installments due till December 2010 was received from the government of Sudan, remaining seven installments due from June 30, 2011, to June 30, 2014, is yet to be released, sources said.

OVL, whose share of investment in the project was $158.01 million, has been following up for the realisation of $98.94 million from the government of Sudan at various levels but hasn't succeeded so far.

This prompted the company to drag Sudan to arbitration, they added.

Also Read: Crude Oil Takes a Breather After Surging on Iran Sanctions

Stay Updated With Business News News On BloombergQuint