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Execution of Bilateral Investment Promotion and Protection Agreements with Venezuela

ONGC has informed Joint Secretary, MoPNG about the BIPA between India and Venezuela.

Venezuela has the largest petroleum reserves in the world, higher than even Saudi Arabia. It is, therefore, one of the most important investment destinations for OVL, to secure equity oil, as a part of its long term Strategic Plan.

OVL currently holds 2 properties in Venezuela, viz. PetroCarabobo and San Cristobal, which envisage an investment of about USD 1.8 billion. Considering the participation of other oil sector PSU alone, the proposed investment would be more than USD 2.5 billion.

OVL is facing problems of implementation of even the signed contracts with Venezuelan State Oil Company, PdVSA. While the dividends approved for the San Cristobal for four years from 2009 to 2012, totaling about USD 421 million have not been paid, various provisions in the contracts for Petrocarabobo Project have been reopened, exposing OVL to the higher investment risk in the country.

Considering the high investment risk in Venezuela, Government of India while approving the investment of USD 2181 million for OVL, OIL and IOC together in the Petrocarabobo project, had advised that the process for entering into BIPA with Venezuela be expedited.

OVL continues to look at Venezuela as an attractive destination for K&P investments from the point of view of underground prospectivity, however, the operational, fiscal ajul legal risks need to be appropriately covered to enable OVL to continue and ovlmi expand its operations in Venezuela. It is felt that signing of the BIPA will provide OVL a much needed security of its investment It is relevant to mention that the ambassador of India to Venezuela has also recommended the early finalization of 131 PA, in November 2012 and OVL, has provided its comments to the proposal.

Considering the visit of Venezuelan Foreign Minister for the forthcoming JCM on 20.12. 2013, it is requested that the matter of signing of BIPA may be suitably raised for its early execution, between the two countries.

Source: SNP Infra Research