Oil and Natural Gas Corp, Reliance Industries and Indian Oil Corp, the nation's biggest companies, are coming together for the first time, to bid jointly for a vast oilfield in Venezuela, which will require an investment of $16-18 billion.
ONGC Videsh Ltd, the overseas arm of the state explorer, is talking to Reliance, IOC and Oil India for jointly bidding for a 40 per cent stake in a field in the vast Orinoco heavy crude oil belt.
"We are evaluating the three massive fields that are on offer and will decide on bidding shortly," a top OVL official said in New Delhi.
Fields in the Carabobo region of the Orinoco belt would produce tar-like oil, which would need to be upgraded to higher-quality synthetic crude. Venezuelan state-run Petroleos de Venezuela SA will retain the remaining 60 per cent.
"The investment required is massive. The crude upgrade facility alone will cost $6-8 billion and so we are looking at partnership with other companies," he said.
IOC may take a 2.5-5 per cent stake while OIL has been assigned a 2.5 per cent stake. The remaining 32.5-35 per cent will be split almost equally between OVL and Reliance.
Each of the three fields on offer can produce 2,00,000 to 4,00,000 barrels of oil per day (10-20 million tonnes a year).
The projects offer low production costs and limited exploratory risks.
"Venezuela requires bidders to indicate where they intend to use the oil. We plan to ship the oil to Reliance Industries' twin refineries at Jamnagar in Gujarat (on the west coast) and IOC's proposed Paradip refinery in Orissa (on the east coast)," the official said.
The under-construction Paradip refinery will be ready by 2011, much before oil would begin to flow from the Venezuelan fields.
Companies ranging from US giant Chevron to China's CNPC have been evaluating the offer. China National Petroleum Corp, the nation's top oil and gas producer and the parent of PetroChina Co, and China Petrochemical Corp, or Sinopec Group, have already made bids.
The tar-like Orinoco oil would then be turned into lighter synthetic crude through multibillion dollar upgraders.
Venezuela has carved out seven heavy oil Carabobo blocks in the Orinoco belt. Venezuela's government says the area contains 272 billion barrels of recoverable reserves. About 10 to 20 per cent of these reserves can be recovered.
Under the rules of the Carabobo field licensing round, foreign partners are required to plan and finance the oil pumping and processing of heavy oil, while retaining a minority stake in the venture.
Since last year, OVL has been seeking a stake in one of the four oilfields in the Carabobo and a piece in the Junin Norte Block in the Orinoco heavy-oil basin.
The Junin area is believed to hold some 500 billion barrels of inplace oil reserves, off which Junin Norte may have about 7-8 billion barrels.
These would be in addition to the 40 per cent share OVL has in the San Cristobal oilfield. OVL and its 60 per cent partner PdVSA will produce 40,000 barrels per day of oil from the field over an 8 year plateau period after investing over $446 million.
OVL and PdVSA have been working together in the Quantification and Certification project in Junin Norte Block covering an area of about 600 sq km. After the recertification jobs, PdVSA is scheduled to award the development through bidding process. OVL is expected to be given preference in the development and production phase.
The same process would be followed in the four blocks in the Carabobo region (erstwhile Cerro Negro area).
Carabobo-I block, that has been certified to hold 10 billion barrels of heavy crude oil reserves, is set to go to Brazil's state-owned oil company Petrobras and OVL is now looking at a stake in the three remaining fields in the Carabobo region.