| cash fuel for hunt in the deep
New Delhi, Nov. 16: The Oil and Natural Gas Corporation (ONGC) has requested the petroleum ministry to enhance the financial powers of its foreign arm, ONGC Videsh, from roughly $45 million (Rs 200 crore) to $100 million.
The ONGC argument is that the present limit of Rs 200 crore, which it is entitled to spend without prior government clearance, was fixed in 1996. The exchange rate at the time was Rs 34 vis-à-vis the dollar. The rupee has depreciated since then and the current exchange rate is hovering around Rs 47 per dollar, as a result of which the financial power in dollar terms has gone down.
Apart from this, there is annual international inflation rate of 2.5 to 3 per cent, which is regularly eroding the limit in real terms.
Senior ONGC officials said when the inflation rate and the depreciation of the rupee is taken into account, the real value of Rs 200 crore has now dwindled to about half the amount.
The proposal submitted to the petroleum ministry also wants the financial powers fixed in dollars, considered a more stable currency from the long-term standpoint.
The Rs 200-crore empowerment was expected to enable ONGC-Videsh to take quick decisions essential in global operations. In Russia’s offshore Sakhalin project, for instance, the company has as its partners companies like global oil major Exxon-Mobil. These are firms that take swift decisions and ONGC-Videsh has to keep pace with them.
The government is expected to take into account the fact that the company has a good track-record with all its foreign investments, including Sudan and Vietnam, starting to pay off.
ONGC Videsh’s stake in the Greater Nile oilfield assures it 3 million tonnes of crude per annum. This has enhanced the country’s oil security by 5 per cent and works out to a million barrels every month. Riding on the success of the Greater Nile project, ONGC-Videsh had acquired another oil property in Sudan for which it had paid over $100 million during the current fiscal.
The government has allowed ONGC-Videsh to clinch deals quickly. The modus operandi for negotiating the new deals for exploration blocks in Sudan have been on the lines of the earlier Greater Nile project in Sudan and the Sakhalin I acquisition in Russia to give ONGC-Videsh the leverage to make quick on-the-spot decisions.
This approach has been adopted to avoid bureaucratic red-tape that has been the nation’s bane in the past. The deals have been financed from ONGC funds.
The fast track has been adopted as ONGC had, in the past, missed some good opportunities for acquiring oilfields abroad due to the long delays taken over clearances from the finance ministry.