OVL likely to forgo oil blocks in Nigeria

ONGC Videsh (OVL) may forgo two highly prospective deep-sea oil blocks in Nigeria as it is unlikely to get government approval for payment of $485 million signing amount before the March 6 deadline.

Nigeria had last month decided to revert the blocks 321 and 323 to OVL if the Indian firm was to make cash payment of $485 million signature bonus in 60-days.

"The model code of conduct (for April/May Elections) would be in place soon and we have been sounded by the Petroleum Ministry that necessary approvals for the payment of signature bonus may not be possible," a source in OVL said.

The Cabinet Committee on Economic Affairs (CCEA) would have to be convinced about the investment particularly as the blocks were snatched from a Korean group and may potentially involve litigation.

OVL would need the CCEA approval before making about Rs 2,360 crore payment. "We have not yet formally communicated our decision to Nigerian authorities but in all likelihood the decision would be to decline the offer," he said.

The company had in August 2005 won blocks 321 and 323, which hold inplace reserves of two billion barrels each, committing $485 million in signing amount. But Nigeria awarded these blocks to Korean National Oil Corp-led group claiming that the Korean firm had a first right of refusal.