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Venezuela Oil Revival Could Unlock ONGC's $500 Million Stuck Dividend

The potential revival of Venezuela's oil sector, driven by US policy changes, could allow ONGC Videsh to recover $500 million in unpaid dividends stuck since 2014 from its stake in the San Cristobal Project. Venezuela's oil production has plummeted due to neglect and sanctions, requiring massive investment—up to $185 billion over 16 years—to recover. While India imports little Venezuelan crude, its upstream companies have significant stakes in Venezuelan fields. Analysts note geopolitical uncertainty remains high, but lifting sanctions could transform ONGC's impaired Venezuelan assets.

Key Points: Venezuela Oil Revival May Help ONGC Recover Stuck Dividend

  • ONGC Videsh has 40% stake in San Cristobal
  • $500 million dividends unpaid since 2014
  • Venezuela's oil output fell from 3m to 1.4m bpd
  • Recovery needs $185bn investment over 16 years
  • US policy shift could lift sanctions on crude sales
3 min read

Revival of Venezuela's oil sector may help ONGC recover its stuck dividend

US moves in Venezuela could lift sanctions, allowing ONGC Videsh to recover $500 million in unpaid dividends from its San Cristobal Project stake.

"at least $30-35 billion of international capital would need to be committed in the next 2-3 years - Rystad Energy"

New Delhi, Jan 6

Any increase in the production of oil from Venezuela by US companies has the potential of lowering crude prices in the international market, benefiting all countries, including India. However, analysts are of the view that there is still too much geopolitical uncertainty in the region for large investments to pour into the Latin American country.

Unlike China, India is not a big importer of Venezuelan crude, which is heavy and tar-like, making it costly to refine into petrol, diesel, jet fuel, and LPG. Apart from the Reliance refinery in Jamnagar, most Indian refineries are not configured to process this crude.

However, India's upstream oil major ONGC, through its subsidiary ONGC Videsh, has a 40 per cent participating stake in Venezuela's San Cristobal Project. Along with this, OVL, Indian Oil Corporation, and Oil India also have an 11 per cent share in the Carabobo-1 field.

A US takeover of Venezuela's oil industry could mean lifting of sanctions on Venezuelan crude sales.

This could lead to ONGC getting its $500 million of unpaid dividends from the San Cristobal field, which are due up to 2014. After 2014, production came to a halt, putting an end to the accrual of dividends. This resulted in the Venezuelan investment of the Indian oil major turning into an impaired asset.

Venezuela's oil industry has contracted from a production level of over 3 million tonnes to around 1.4 million tonnes at present, due to neglect and international sanctions. This would require major investments over several years before production can increase dramatically, according to experts.

To boost output beyond the 1.4 million bpd level would be possible with a stable investment of $8-9 billion per year from 2026 to 2040, on top of 'hold-flat' capital requirements. Venezuelan crude oil production could then recover to 2 million bpd by 2032 and to 3 million bpd by 2040, the firm said in a report.

"While some of this investment can be financed organically by Venezuela's national oil company PDVSA, at least $30-35 billion of international capital would need to be committed in the next 2-3 years to make a 3 million bpd-by-2040 scenario plausible," global consultancy Rystad Energy said.

In the late 1990s, US imports of Venezuelan crude reached almost 2m barrels of oil a day, more than half of the South American country's output. At the end of last year, US imports from Venezuela were just 135,000 barrels a day.

Returning Venezuela's crude production to 3m barrels of oil a day would require 16 years of work and investment totalling $185bn, according to figures from Rystad Energy.

- IANS

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Reader Comments

S
Sarah B
Interesting analysis. The scale of investment needed is staggering - $185bn over 16 years! While lower global crude prices would benefit India as an importer, I'm skeptical about such massive capital flowing into Venezuela given its political history. ONGC's recovery might take longer than hoped.
P
Priyanka N
Good to see some potential light at the end of the tunnel for our oil companies. But this also highlights our over-dependence on specific types of crude. We need to diversify our energy sources and invest more in renewables. Jai Hind!
A
Aman W
With all due respect to the analysts, I think our PSUs need to be more cautious with overseas investments. First the Russia sanctions issue, now this Venezuela situation. Taxpayer money is at stake. Better due diligence is required before committing to such volatile regions.
K
Karthik V
The fact that only Reliance's refinery can process this heavy crude is telling. It shows the gap in our refining infrastructure. Hopefully, some of that recovered dividend can be reinvested into upgrading our own capabilities. Long-term energy security is key.
M
Michael C
The numbers here are eye-opening. Production fell from 3 million to 1.4 million tonnes due to neglect and sanctions. It's a classic case of how political instability can destroy a nation's prime resource. Hope for stability for the Venezuelan people and for ONGC's investment.

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