OVL to buy 25 per cent stake in South Atlantic block

ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), is in talks with UK-listed Falkland Oil and Gas Ltd to acquire a 25 per cent stake in an exploration in the South Atlantic sea.

The two exploration blocks are lying off Falkland Islands, 350 miles off the Southern tip of Argentina, sources said.

The UK company will have operating licence in the licence areas to the south and east of the Falkland Islands, including the two exploration blocks, 

OVL would contribute its pro-rata share of 2012 drilling programme, comprising two exploration wells. Besides, it would pay its pro-rata share of certain historical costs incurred during 2011 related to this year. The costs incurred are estimated to be around $68 million.

The blocks, at water depths ranging from 500 meters to 2,000 meters, are estimated to hold estimated resources of up to 15 billion barrels of oil equivalent or 46 trillion cubic feet of gas reserves.

Besides, OVL would make a cash payment of $40 million. If the Loligo prospect, where drilling is due this year, turns out to be a gas discovery, a liquefied natural gas (LNG) terminal would be built onshore with a capacity of about 7 million tonnes per annum for exports to consumption centres like India. But if the reserves are of lesser than quantity, a floating LNG project may be developed, they said.

FOGL plans to drill one exploration well (Loligo) in Phase-1 in the Northern License Area. In Southern Licence Area it has committed to drill one well by 30 December 2015.