A consortium of ONGC Videsh, Indian Oil and Oil India has decided against buying 11 per cent stake that their partner Petronas of Malaysia is selling in a $20 billion oil project in Venezuela.

Petroliam Nasional Bhd, Malaysia’s state-run oil company, has decided to withdraw from the Carabobo-I project following dispute over terms with Venezuela’s state explorer Petroleos de Venezuela SA (PdVSA).

OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has 11 per cent stake in the project while OIL and IOC hold 3.5 per cent each. Spain’s Repsol SA holds 11 per cent stake in the project while the remaining 60 per cent is with PdVSA.

All the partners in the project, including PdVSA, have right of first refusal or pre-emption rights to the Petronas stake.

“We have decided against exercising the pre-emption rights,” a top official in the Indian consortia said. “We intimated Petronas of our decision last month.”

Repsol too has declined to buy Petronas stake.

The Indians have, however, promised to look for a suitable replacement for Petronas.

Chinese firms, the official said, could potentially be asked to pick up Petronas stake.

“Reliance Industries could have been an option but already have got one large oil project in Venezuela just a few days back,” the official said.

The Carabobo-1 project in the Orinoco heavy oil belt began limited production in March this year and is planned to produce 480,000 barrels of oil a day at peak. The field requires $20 billion to develop and produce oil.

The consortium, which had in 2010 paid $1.05 billion to win the project, is also investing in a separate a 200,000 barrel per day upgrader to convert heavy crude into light crude oil.

Sources said Petronas conveyed to Venezuelan government on August 27 its decision to exit the project. Partners had 30 days to exercise their pre-emption and the Indians as well as Repsol conveyed their decision before the deadline ended.

Under Venezuelan law, the government has to approve the departure and the new ownership structure of the venture.

OVL has in recent weeks struck deals to buy 20 per cent stake in a giant Mozambique gas field for over $5 billion, 80 per cent of which is to be financed through debt.

Last week, it bought an additional 12 per cent stake in a Brazilian oilfield for $529 million after blocking a Chinese entry.

OVL, which had a 15 per cent stake in block BC-10, exercised a pre-emption right to block China’s Sinochem Group from buying a 35 per cent interest in the oilfield from Petrobras of Brazil.

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