India’s ONGC gets US green light to ramp up Venezuela oil output

India’s state-run Oil and Natural Gas Corporation (ONGC) is preparing to expand its operations in Venezuela after receiving a licence from the US Treasury’s Office of Foreign Assets Control (OFAC), easing restrictions that had limited the company’s activities in the country, The Times of India writes.

The approval gives ONGC greater scope to invest in its Venezuelan assets, increase oil production and pursue new agreements with local partners.

The company is also considering taking over the operation of some projects currently managed by Venezuela’s state-owned oil company PDVSA.

Anupam Agarwal, ONGC’s director of finance, said the company could now pursue its Venezuelan investments with fewer constraints.

“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 US licence could also help ONGC resolve financial issues connected with its Venezuelan investments. The company expects to gain greater flexibility in handling project-related finances and could potentially recover more than $500 million in pending dividends.

ONGC has been in discussions with Venezuelan authorities and its joint-venture partners over its investments and future projects.

Agarwal said the company was seeking new agreements and exploring the possibility of taking over operatorship of some projects from PDVSA.

US sanctions on Venezuela’s oil sector had for years restricted ONGC’s ability to conduct financial transactions, invest in existing assets and expand its operations. The easing of those constraints could allow the Indian company to play a larger role in Venezuela’s oil industry.

Venezuela holds about 303 billion barrels of proven crude oil reserves, the largest proven reserves in the world. Production has nevertheless remained below its potential after years of underinvestment, sanctions and operational difficulties.

Venezuela’s newly enacted petroleum law could also encourage investment by providing additional fiscal incentives for resource development.

ONGC is particularly interested in shallow and onshore fields, where it has operating experience from 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,” Agarwal said.

The company now plans to apply that experience to its Venezuelan operations as sanctions-related restrictions 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.

By Aghakazim Guliyev