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India rejects Venezuela's $10b energy fund offer, for Russia China
INDIA has rejected Venezuelas offer to set up $10 billion dedicated binational sovereign fund to pick up energy assets in Latin America. Instead, India has decided to team up with Chinese and Russian firms to develop energy assets in Venezuela and elsewhere in the region.
Given the political risks in Venezuela, it will be advisable to take a consortium financing and energy assets development with China and Russian firms to spread political risks an external affairs ministry official told Financial Chronicle on condition of anonymity.
The finance ministry is in sync with the line pursued by external affairs ministry vis-à-vis taking exposure in Venezuela, the official added.
Initially, Venezuela President Hugo Chavezs proposal for dedicated fund with an initial corpus of $10 billion was being actively considered. This fund was expected to monetise energy assets in the Latin American nation.
After having reviewed the proposal from Caracas, both external affairs and finance ministries have decided to ahead with a consortium approach. It will not only help Indias offensive interests in attaining energy security but also spread the sociopolitical risks.
India mulls to make additional investment worth $2-2.5 billion in medium term to bring these assets into stream.
Countries such as Russia and China have either committed or already investing up to $5 billion and $10 billion, respectively for drilling oil and natural gas in Venezuela.
As per work plan drawn up by both external affairs and finance ministries, at least two companies from all three countries will be nominated to join the consortium for mega bidding of energy assets. However, India will have reserve the right to form joint ventures with other partners in the region as well.
"If such a consortium between India, China and Russia is formed, its is extremely important to have crystal clear mandate. It should be transparent between all members on how much is the risk and what will be the returns on investment. Otherwise, it will be a complete mess," said Kalpana Jain, senior director at independent consultancy, Deloitte in India.
"It is important to decide how assets are going to be shared both financially and materialistically. For instance, cost of transporting crude to India will be different from that to China or Russia. Several factors need to be examined and decided before starting such a consortium, Jain explained.
It is a right move from Indias side, indicated, Dilip Khanna, partner, Ernst & Youngs oil and gas practice. It is a good strategy. It is always beneficial to form a international consortium for projects in the countries where sociopolitical risks may be high, Khanna said.
We have been thinking to form consortium with foreign firms and bid for blocks. There may be cultural differences. But, once we get into serious business with a Chinese or Russian firm, all issues will be examined and decided, said TK Ananth Kumar, director (finance) of Oil India.
Venezuelan president Hugo Chavez had mooted the idea of a bi-national fund with prime minister Manmohan Singh in 2006.
This proposal was also pursued by Venezuela's vice minister for foreign affairs Temir Porras Ponceleon during his visit to India early this year. The proposal also figured at Ponceleon's meeting with oil minister Murli Deora.
Indian companies are aggressively looking to acquire energy assets across the world to meet growing demand at home.
"Government has asked us to look for potential projects. We can acquire assets up to $2 billion every year," ONGC Videsh managing director RS Butola said earlier.
This year, a consortium of OVL, IOC and OIL bagged 40 per cent equity interest to develop the Carabobo 1 North and Bloomberg Carabobo 1 Central blocks located in Orinoco heavy oil belt in eastern Venezuela.
The project has estimated oil in place of about 27 billion barrels.
In 2008, OVL acquired 40 per cent participating interest (PI) in San Cristobal Project in Venezuela. OVL 's share in the oil production was 0.704 MMT during 2009-10 and 0.671 MMT during 2008-09. The company has invested nearly $ 191 million in the project till March 2010.
To sweeten and relaunch economic as well as trade relations with India, Venezuela has offered to supply an additional 100,000 barrels crude oil on daily basis at pre determined rates irrespective of crude market fluctuations globally.
India sources about 150,000 barrels crude from Venezuela per day. Venezuela has garnered $4 billion worth revenues in oil trade during 2009.
India rejects Venezuela's $10b energy fund offer | mydigitalfc.com
INDIA has rejected Venezuelas offer to set up $10 billion dedicated binational sovereign fund to pick up energy assets in Latin America. Instead, India has decided to team up with Chinese and Russian firms to develop energy assets in Venezuela and elsewhere in the region.
Given the political risks in Venezuela, it will be advisable to take a consortium financing and energy assets development with China and Russian firms to spread political risks an external affairs ministry official told Financial Chronicle on condition of anonymity.
The finance ministry is in sync with the line pursued by external affairs ministry vis-à-vis taking exposure in Venezuela, the official added.
Initially, Venezuela President Hugo Chavezs proposal for dedicated fund with an initial corpus of $10 billion was being actively considered. This fund was expected to monetise energy assets in the Latin American nation.
After having reviewed the proposal from Caracas, both external affairs and finance ministries have decided to ahead with a consortium approach. It will not only help Indias offensive interests in attaining energy security but also spread the sociopolitical risks.
India mulls to make additional investment worth $2-2.5 billion in medium term to bring these assets into stream.
Countries such as Russia and China have either committed or already investing up to $5 billion and $10 billion, respectively for drilling oil and natural gas in Venezuela.
As per work plan drawn up by both external affairs and finance ministries, at least two companies from all three countries will be nominated to join the consortium for mega bidding of energy assets. However, India will have reserve the right to form joint ventures with other partners in the region as well.
"If such a consortium between India, China and Russia is formed, its is extremely important to have crystal clear mandate. It should be transparent between all members on how much is the risk and what will be the returns on investment. Otherwise, it will be a complete mess," said Kalpana Jain, senior director at independent consultancy, Deloitte in India.
"It is important to decide how assets are going to be shared both financially and materialistically. For instance, cost of transporting crude to India will be different from that to China or Russia. Several factors need to be examined and decided before starting such a consortium, Jain explained.
It is a right move from Indias side, indicated, Dilip Khanna, partner, Ernst & Youngs oil and gas practice. It is a good strategy. It is always beneficial to form a international consortium for projects in the countries where sociopolitical risks may be high, Khanna said.
We have been thinking to form consortium with foreign firms and bid for blocks. There may be cultural differences. But, once we get into serious business with a Chinese or Russian firm, all issues will be examined and decided, said TK Ananth Kumar, director (finance) of Oil India.
Venezuelan president Hugo Chavez had mooted the idea of a bi-national fund with prime minister Manmohan Singh in 2006.
This proposal was also pursued by Venezuela's vice minister for foreign affairs Temir Porras Ponceleon during his visit to India early this year. The proposal also figured at Ponceleon's meeting with oil minister Murli Deora.
Indian companies are aggressively looking to acquire energy assets across the world to meet growing demand at home.
"Government has asked us to look for potential projects. We can acquire assets up to $2 billion every year," ONGC Videsh managing director RS Butola said earlier.
This year, a consortium of OVL, IOC and OIL bagged 40 per cent equity interest to develop the Carabobo 1 North and Bloomberg Carabobo 1 Central blocks located in Orinoco heavy oil belt in eastern Venezuela.
The project has estimated oil in place of about 27 billion barrels.
In 2008, OVL acquired 40 per cent participating interest (PI) in San Cristobal Project in Venezuela. OVL 's share in the oil production was 0.704 MMT during 2009-10 and 0.671 MMT during 2008-09. The company has invested nearly $ 191 million in the project till March 2010.
To sweeten and relaunch economic as well as trade relations with India, Venezuela has offered to supply an additional 100,000 barrels crude oil on daily basis at pre determined rates irrespective of crude market fluctuations globally.
India sources about 150,000 barrels crude from Venezuela per day. Venezuela has garnered $4 billion worth revenues in oil trade during 2009.India rejects Venezuela's $10b energy fund offer | mydigitalfc.com
