OMEL's hydrocarbon find may not be commercially viable

ONGC-Mittal Energy Ltd, a co-venture of state-owned Oil and Natural Gas Corp and steel tycoon L N Mittal, has made a hydrocarbon discovery in Nigeria but the find may not be commercially viable.

"OMEL drilled well Kuyere-1 in block OPL-279 during January-February and discovered hydrocarbons," Oil Minister Murli Deora said in a written reply to Rajya Sabha.

He however did not say if OMEL had found oil or gas.

"As commerciality of the present discovery on standalone basis may be challenging, OMEL is studying the potential of further prospects in the block," he said.

OMEL, a joint venture of ONGC Videsh and Mittal Investment Sarl, was awarded two deepwater exploration block OPL-279 and OPL-285 in Nigeria and it entered into a Production Sharing Contract (PSC) for the same with the Nigerian National Petroleum Corp (NNPC) on February 23, 2007.

The company plans to drill a commitment well in OPL-285, he said. "Production of oil is subject to establishing a commercial oil discovery and further detailed exploration and appraisal work."

As part of the agreement with the Nigerian government, OMEL was to develop a downstream project in lieu of being awarded the two exploration blocks.

It had the choices of setting up a 180,000 barrels per day oil refinery or 2,000 megawatt (MW) power plant or an East-West Railway line or any other downstream project as may be determined by the country's Steering Committee, he said.

"The Steering Committee for downstream projects in its meeting held on January 28, 2010 had approved setting up of a refinery of 180,000 bpd capacity for export of petroleum products using Nigerian crude as feed stock," he said, adding the panel has ordered a feasibility study for the project.

"OVL's liability towards the project will be restricted to its contribution as one of the promoter shareholder of OMEL," he added.