OVL's Siberia assets could hold more than estimated

OVL acquisition of Imperial Energy Corp may have invited sharp criticism, but independent audits have indicated that the total oil reserves held by the Russian fields of the company could be more than double what the state-owned firm has estimated.

ONGC Videsh, the overseas investment arm of state-run Oil and Natural Gas Corporation (ONGC), acquired Russia-focused Imperial Energy Plc for $2.1 billion in 2009.

Sources said OVL had estimated the proved or 1P reserves of the Siberian fields of Imperial at 21.40 million tonne of oil and oil-equivalent gas.

Furthermore, the probable or 2P reserves of the assets -- which have at least a 50% chance of being produced -- were pegged at 112.15 million tonne. In addition, another 114.76 million tonne of reserves were classified as possible, or 3P reserves, which have a 10% chance of being recovered.

Sources said ONGC, in the run-up to its share sale next month, had engaged internationally renowned reserve certifier DeGolyer & MacNaughton (D&M) to audit the reserves of 12 overseas fields in which OVL has a stake.

In its report, D&M has pegged the 3P reserves, which have a chance of being developed under favourable circumstances, at 383.58 million tonne, far higher than OVL's own estimates.

The audit also put the 1P reserves at 20.62 million tonne and 2P reserves at 107.12 million tonne of oil and oil-equivalent gas.

OVL has been criticised for the Imperial buy as the fields have not behaved in the manner predicted previously. The fields in Tomsk region of Siberia were projected to have a peak output of 80,000 barrels per day by its previous British owners, but production currently amounts to just around 17,000 bpd.

Peak output from the fields is now estimated at 40,000-45,000 bpd.

D&M has estimated that OVL's 12 oilfields in Russia, Sudan, Syria, Brazil, Colombia, Venezuela, Vietnam, Myanmar and Egypt cumulatively hold 119.977 million tonne of 1P reserves, 288.299 million tonne of 2P reserves and 639.706 million tonne of 3P reserves of oil and oil-equivalent gas.

The firm's Sakhalin-1 oil and gas fields are the biggest, with 1P, 2P and 3P reserves of 47 million tonne, 98.059 million tonne and 142.257 million tonne, respectively. Imperial is the second-biggest asset of OVL in terms of reserves.