The Hindu Business Line : ONGC Videsh to relinquish block in Libya

New Delhi, May 19 ONGC Videsh Ltd (OVL) plans to relinquish its onshore exploration block in Ghadames basin, Libya, in favour of the National Oil Company of that country, as OVL and its partner Turkish Petroleum Overseas Company (TPOC) felt that the prospects were not very attractive commercially.

Sources said that in Block NC 188, while OVL holds 49 per cent stake, TPOC, subsidiary of Turkish national oil company, held the remaining 51 per cent participating interest (PI) and is the operator. “After finishing the work programme commitments, the two partners have agreed to relinquish the asset as they felt that the block does not hold significant potential,” sources told Business Line.

OVL has taken the approval of its board for the same. After completing the seismic surveys in the area as per the programme, two exploratory wells were drilled in Block NC-188 which were plugged and abandoned as dry wells. Subsequently, the exploration phase of the block has been extended till June 11, 2009.

Third partner proposal

The two partners had also explored the possibility of bringing in a third partner in the block. OVL had proposed to farm out 16 per cent of its participating interest out of the 49 per cent to MEDCO Energi. TPOC had proposed to farm out 17 per cent of its interest to MEDCO. However, the National Oil Company of Libya refused permission.

After independently reviewing the prospects, the two partners proposed to relinquish the block. The financial outgo for the block till date has been about $17.4 million and OVL’s share is about $8.53 million. Farm out/in arrangement is one used primarily in the oil and gas industry, in which the owner of mineral rights or lessee (the first party) assigns a working interest to an operator (the second party), the consideration for which is specified exploration and/or development activities.

The first party retains an overriding royalty or other type of economic interest in the mineral production. The arrangement from the viewpoint of the second party is termed a ‘farm-in arrangement’.

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