OVL to invest additional $149.46 million in Vietnam block

The cabinet committee on economic affairs today authorised ONGC Videsh Ltd (OVL), the overseas arm of the state-run oil explorer Oil and Natural Gas Corporation, to make an additional investment of $149.46 million for development and exploration of Block 06.1 in Vietnam.

OVL has been authorised to make investments from the revenue proceeds of the project without any funding from government. In the event of any cost overrun beyond the amount ($149.46 million), OVL will bring a fresh proposal to the empowered committee of secretaries, a government release said.

OVL has a 45 per cent participating interest (PI) in the gas producing shallow water offshore block 06.1 under a petroleum production sharing contract (PSC) with Petro Vietnam (PVN). The National Oil Company (NOC) of Vietnam has a 20 per cent PI and BP Exploration (Vietnam) Ltd (BPEVL) - the operator - has a 35 per cent PI.

OVL had initially committed to invest $228 million in the Vietnam project. Production from the Lan Tay (LT) field in Block 06.1 in Vietnam commenced on 21 January 2003, after completion of Phase-I of the project. The initial production of 0.81 billion cubic metres (BCM) in 2003 has increased to 4.106 BCM in 2008-2009 and the 45 per cent share of OVL in the year 2008-2009 was 1.848 billion BCM.

The original feasibility report envisaged the development of the project in three phases. Development of phases I and II have been completed and the present proposal is for an additional investment of $149.46 million in phase III of the project.

Phase III of the project envisages development of Lan Do (LD) field, which includes drilling of two developments wells, sub-sea completion and tie-back of the wells with Lan Tay platform through a common pipe line.

The expenditure on the whole project during 1998-2015 is estimated at $838.80 million against the earlier estimates of $228-377.36 million, thereby necessitating an additional expenditure of $149.46 million.

The additional investment is expected to provide higher reserve accretion of hydrocarbon and more production from the project to OVL, the release said.