The Hindu Business Line : Call for hiking investment limit of ONGC Videsh

Though the investment limit was increased from $50 to 70 million last year, ONGC believes that such low limits have little relevance to the high value oil and gas sector.

Kolkata , June 13

IN tune with the ONGC Videsh Ltd's (OVL) efforts to acquire equity in oil and natural gas assets abroad, the Standing Committee on Oil Diplomacy for Energy Security may recommend to the Union Government an increase in the investment limit of OVL to the range of $100 million. The board of directors of OVL is now allowed to take investment decisions up to $70 million (Rs 300 crore). The high profile standing committee was formed in November 2004 to evolve ways of reducing the country's dependence on imported oil, and is headed by Mr Arjun Sengupta.

Though the Government had increased the investment limit from $50 million to $70 million last year, ONGC is of the view that such low investment limits have little relevance to the high value oil and gas sector. Since investments beyond the permissible limits need to be approved by the Cabinet committee, the company often loses time in taking a call on emerging investment opportunities.

According to sources, as part of its focus on enabling Indian oil companies to acquire oil and gas assets abroad, the committee is actively considering recommending the enhancement of the existing limit on OVL to a reasonable level.

Currently, OVL owns equity in oil and gas assets in Vietnam, Sudan, Russia (Shakhalin-I) and Myanmar, and has recently drawn up an ambitious investment plan for the next two years. The company is currently negotiating for a number of deals in Russia, Iran, Venezuela, Ecuador, Cuba and Brazil. Overall, the capital expenditure for 2005-06 may cross last year's level of Rs 5,000 crore. This is in addition to capital expenditure of over Rs 10,000 crore by ONGC in the domestic sector.

On the cards is a maiden foray into the American continent this fiscal, and an agreement on picking up a stake in Yadavaran field and Jufeyr field in Iran is expected to take place following the ongoing gas purchase deal between the two countries.

In Russia, where ONGC is interested in a number of deals, including a stake in the giant Shakhalin-III oil field and Yukos, the company has reportedly asked the Russian authorities to clarify the ownership position of different companies as a prerequisite for taking a decision.

While preparing itself to finance massive investment plans, ONGC is hopeful of making the most out of its available funds of over Rs 8,000 crore. "At this moment, we have adequate funds and do not require borrowings," Mr R. S. Sharma, Director (Finance) of ONGC, told Business Line.

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