Sudan denies licence extension to OVL; seeks higher taxes

A technician is pictured inside a desalter plant of Oil and Natural Gas Corp (ONGC) on the outskirts of Ahmedabad, India, September 30, 2016. Picture taken September 30, 2016. REUTERS/Amit Dave - RTSS6X9

Sudan has denied India's ONGC Videsh Ltd an extension of licence to operate an oilfield as it sought higher royalties and taxes to make up for revenue lost due to drop in oil prices.

The licence for Block 2B expired last November and an automatic 5-year extension is available but Sudan, whose revenues have been hit with a drop in oil prices, wanted higher taxes and royalties before it agreed to the same, officials said.

OVL, which held 25 per cent stake in the block, and its partners China National Petroleum Corp (CNPC) and Malaysia's Petronas did not agree to the demand, they said.

OVL had in 2003 bought 25 per cent stake in Greater Nile Oil Project (GNOP) comprising Block 1, 2 and 4 in the undivided Sudan. It lies in the prolific Muglad basin, about 780 kms in the South-West of Khartoum, the capital of Sudan.

The project produces about 50,000 barrels of oil per day.

Upon secession of South Sudan from Sudan in July 2011, the contract areas of blocks 1, 2 and 4, spread over both areas, were split with a major share of production and reserves now situated in South Sudan.

Blocks 2A, 2B and 4N are in Sudan, and blocks 1A, 1B as well as 4S are in South Sudan.

Block 2B produces 28,000 bpd of oil while Block 4 is in the exploration phase.

The official said OVL and its partners CNPC (40 per cent stake), Petronas (30 per cent) and Sudapet of Sudan (5 per cent) wanted a 5-15 year extension, but Sudan did not agree.

The previous 20-year contract expired in November 2016.

Sudan has not paid OVL for the oil from GNOP it consumed.

Post secession, as the Sudanese government's share of total production in 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 Sudanese government has not been received, he said, adding that OVL's share of the outstanding dues is about USD 300 million.

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

OVL, along with state-owned Oil India, had constructed and financed a 741-km multi-product pipeline from Khartoum refinery to Port Sudan for USD 194 million. OVL's share of project cost was 90 per cent while the rest was borne by OIL.

The pipeline was handed over to the Sudanese government in October 2005. The lump sum price together with lease rent was to be given to OVL in 18 equal half-yearly instalments, effective December 2005.

While the payment of 11 half-yearly instalments due till December 2010 was received from the government, the remaining seven instalments due from June 30, 2011 to June 30, 2014, are yet to be released.

OVL, whose share of investment in the project was USD 158.01 million, has been following up for realisation of USD 98.94 million from the Sudanese government at various levels, he added.