ONGC Videsh told not to pursue asset buys in Falkland Islands

Territorial claims and disputes between Britain and Argentina are cited as the reasons

After having to abandon its oil and gas assets quest in Vietnam off the South China sea, the Ministry of External Affairs (MEA) has asked ONGC Videsh Limited (OVL) not to go ahead with its acquisition of hydrocarbon assets located in deep water in Falkland Islands.

The advisory by the MEA to the Petroleum and Natural Gas Ministry comes after OVL had sought clearance from the Foreign Ministry for making bids for two oil and gas blocks up for offer in the Falkland Islands which had been termed as attractive assets.

The OVL had got a farm-in offer from Falkland Oil and Gas Limited (FOGL) through its advisor Stellar Energy for divestment of up to 35 per cent participating interest in two of its exploration acreages located in the deep water Falkland. The opportunity was evaluated by OVL's technical team as well as Fugro Robertson Ltd (FRL), technical consultant engaged by OVL. Both the teams found the blocks attractive in terms of their large resources but also risky on account of being a frontier basin and the prevailing geo-political situation.

The blocks are located in the South and East Falkland basins in water depths ranging from 500 metres to 2,000 metres. There sources estimate of the prospects identified vary from nearly 7 bbl to 13 bbl of oil (for oil case) or 46-57 trillion cubic feet (tcf) for gas case.

Although a few wells drilled in the Northern offshore indicate presence of hydrocarbons, the offered Eastern and Southern acreage is rank exploratory.

In view of the larger hydrocarbon potential and a number of leads and prospects in the acreage, the opportunity was found to be interesting for pursuing. OVL, represented by the Petroleum and Natural Gas Ministry, had approached the MEA for clearance to put in bids for these assets.

However, officials in the Petroleum Ministry said that the MEA had advised OVL against pursuing interests in the region due to the territorial claims and disputes between Britain and Argentina. It was also felt that OVL was seeking assets in virtually other end of the world while its recently acquired Imperial Energy in Russia had turned out to be a not so good opportunity.

OVL gave up drilling in Block 128 in Vietnam due to severe logistic constraints in anchoring the rig on a hard sea bottom at the proposed drilling location. OVL had acquired two offshore exploration blocks (127 and 128) in Vietnam as Operator with 100 per cent Plunder Production Sharing Contracts (PSCs). A well was drilled in Block 127 in 2009 and no hydrocarbon was found. After fulfilment of PSC obligations, the block was relinquished.

Minister of State for Petroleum and Natural Gas R. P. N. Singh had stated in Parliament recently that sovereignty over areas of the South China Sea was disputed between many countries in the region.