ONGC Videsh may get back two Nigerian oil blocks

30 January 2009

ONGC Videsh Ltd, the overseas arm of state-run explorer Oil and Natural Gas Corp (ONGC), will get back two highly prospective deep-water oil blocks in Nigeria, which were snapped up by the Nigerian government and awarded to a consortium led by Korean National Oil Corp (KNOC).

ONGC Videsh had, in August 2005, won offshore blocks 321 and 323 in Nigeria, which have in-place reserves of two billion barrels each.

While OVL committed $485 million in signing amount, the Nigerian government signed the production sharing contract for the two blocks with the KNOC consortium, saying the Korean firm had the first right of refusal.

The consortium paid $92 million in cash and offered a letter of credit to pay an additional $231 million as production share to the Nigerian government to cover a 60 per cent interest in blocks OPL321 and OPL323, forcing Nigerian president to cancel the allocation.

South Korea has a 60 per cent stake, with British company Equator owning 30 per cent and a Nigerian firm the remaining 10 per cent, in the product-sharing deal.

Nigeria's energy ministry wrote to OVL on 6 January saying the two blocks would be restored to the company if it paid the $485-million signature bonus in full within 60 days, an official said, adding, OVL was evaluating the offer and would respond before 6 March.