OVL May Invest $1.5 Billion for Blocks In Ecuador

Ecuador could be ONGC Videsh Ltd's next big catch with the largest one-time investment by an Indian firm abroad. Although aware that it may have to shell out $1.5 billion in one go, OVL has decided to bid for EnCana Corp's producing blocks, either with a foreign partner or alone.

Though OVL's endeavor would be to identify a foreign partner to jointly bid for the EnCana's share, in case a "tie up with the partners does not become feasible within the time limit available, then OVL would bid alone".

The reason for OVL's desperation is that the acquisition would provide India 900,000 barrels per day as well as an opportunity to expand its operations in Latin America that accounts for 10 per cent of world's proven oil reserves.

EnCana's 2003 production in Ecuador averaged 62,300 bpd and the current production is reportedly about 90,000 bpd, which is slated to reach 115,000 bpd in 2005.

As on July 1, EnCana's share of equity reserves was estimated at 329 million barrels with proven reserves pegged at 217 million barrels. Additional possible and risked exploration reserves are estimated in excess of 267 million barrels.

EnCana has put on offer its equity in five oil blocks, of which four are producing, and 36.3 per cent stake in the 500-km Oleoducto de Crudos Pesados crude pipeline that has a capacity of 450,000 barrels per day.

The reason for the share sale is that it recently acquired US firm Tom Brown for $2.35 billion and plans to divest its oil assets in Ecuador to cover the debt taken on this purchase. The share transfer would involve sale of the three holding entities through which it owns these shares.

EnCana's 100-percent owned Tarapoa block produced an average of 59,785 bpd in April 2004. The 2004-05 development plan includes the drilling of 21 wells in the undeveloped eastern portion of the 90,000-acre block. It has a 40 percent non-operated interest in Block 15 that entitles it to about 30,000 bpd, after royalties. Production from the block averaged 42,056 bpd in April 2004.