US firm walks out of OVL's Russia project after US sanctions

ONGC Videsh Ltd's loss-making Imperial Energy venture in Russia has suffered a setback with its technology partner walking out of the project because of US sanctions.

OVL, the overseas arm of state explorer Oil and Natural Gas Corp (ONGC), in September 2013, roped in Denver-based Liberty Resources to tap Bazhenov shale formations in Siberia.

Liberty and OVL had done a lot of work on the Snezhnoye field and had planned two horizontal pilot wells to explore how to exploit oil from low permeability and hard-to-recover tight sand reservoirs as well as Bazhenov shale in Imperial's acreages.

But with US imposing sanctions on Russia over its involvement in Ukraine meant that the American company could not work in that country. Liberty had hoped that it can win a waiver but the US administration was not obliging. They (Liberty) have expressed inability to support the project, OVL Managing Director Narendra K Verma told PTI.

They are no longer there in the project but we are carrying on our own. We have made arrangements for doing the pilot drilling. Liberty had expertise in exploration of tight sand reserviors and OVL was willing to give the American firm up to 30 per cent stake in Imperial Energy - the Russia-focused company it acquired in 2009 for $2.1 billion.

Imperial Energy has been a loss making venture for OVL as production did not match the targets projected before the acquisition and the oil was trapped in difficult sand formations.

Its true that Liberty has walked out but we are confident of overcoming this and carrying out work on our own, Verma said.

A total of four wells will be drilled at an investment of $10 million to test recovery of oil from Bazhenov shale, he said. Bazhenov is believed to hold around 360 billion barrels of recoverable reserves. Scope of activities and core assets of Imperial Energy are clustered in the Northern and Western part of Tomsk region in Siberia.

OVL had on September 12, 2013, signed a technology partnership agreement with Liberty, one of the global leaders in hydro-fracturing technology and completion in tight reservoirs.

Imperial Energy hoped that the pilot programmes with Liberty would give positive results for adoption of the technology for full-fledged and economically feasible development of the hard-to-recover tight reservoirs and the Bazhenov shale with the support of the recently tax benefits to such oil by the Russian government.