India's ONGC is poised to take over the operation of two Venezuelan oil projects from state-owned PDVSA, which would give the Indian producer direct operational control over assets linked to the world's largest proven crude oil reserves. The move carries strategic weight for India, the world's third-largest crude oil importer, which has sought to deepen its foothold in resource-rich nations to help feed rising energy demand. Reuters exclusively reported on Wednesday that ONGC expects to sign new agreements "very soon" under Venezuela's new petroleum law after years of limiting its activities because of U.S. sanctions.

Speaking on ONGC's June-quarter earnings call, Finance Director Anupam Agarwal said the company's overseas arm, ONGC Videsh, India's largest international oil and gas exploration vehicle, now has "full freedom" to pursue opportunities in Venezuela after sanctions-related constraints were eased. Those restrictions had previously limited the company's activity in the country. A shift to operatorship would mark a significant step up from ONGC's historical role as a minority partner, giving it authority over day-to-day production and development decisions at fields where it has long held equity.

ONGC Videsh currently holds a 40% stake in the San Cristobal oil field and, together with other Indian companies, an 18% interest in the Carabobo-1 heavy oil project. Agarwal said Venezuela's new petroleum law provides additional incentives for foreign investors and expressed confidence that agreements transferring operatorship of some projects from PDVSA could be finalized soon.

"Now we have full freedom to work on the Venezuela projects. Earlier, we were restricting our operations there because of the sanctions-related risk," Agarwal said.

Separately, ONGC said it regained its full 20% stake in Russia's Sakhalin-1 oil and gas project in December, following a four-year disruption after Russia restructured the project in response to Western sanctions.

Agarwal said the restored stake has doubled Sakhalin-1's quarterly revenue contribution to roughly 10 billion Indian rupees, or $105 million, from about 5 billion to 6 billion rupees previously. Reuters reported that ONGC kept its stake after agreeing to make abandonment fund payments in rubles using dividends that had been frozen in Russia.

The development comes as India's purchases of Venezuelan crude have cooled after a sharp surge earlier this year. According to Kpler data cited by Bloomberg, Venezuela's crude exports fell 25% in July to about 856,000 barrels per day after shipments to India were cut roughly in half from June, as improving Middle East supply reduced Asian demand for discounted Venezuelan barrels.

By Charles Kennedy for Oilprice.com