KOLKATA (miningweekly.com) – ONGC Videsh Limited (OVL), the overseas arm of India’s national oil, gas exploration and production major ONGC, has agreed with the Sudan government to work out a mechanism to settle the $400-million outstanding dues of the Indian oil company.

The decision to find a solution through negotiations followed a visit of a Sudanese government delegation to ONGC headquarters in New Delhi, over the weekend, officials here said.

“A Sudanese Ministerial delegation visited OVL office last week and held discussions with officials led by OVL CEO, Narendra Verma,” a company statement said.

The Sudanese delegation gave an assurance that the Sudan government was making efforts to resolve the default payment to OVL and that both parties would continue to hold talks to find a mechanism to liquidate the dues at the earliest, the statement by the Indian company said.

The Indian company was also informed that the Sudan government was banking on a quick economic recovery following an agreement signed with the South Sudan government, which would see resumption of crude oil transportation from South Sudan to Sudan through the Peglig-Port Sudan pipeline and ensuring higher refining capacity located in Sudan.

However, the arbitration proceedings initiated by the Indian oil and gas company, in London, was casting a shadow over the move towards a negotiated settlement of the $400-million default.

The Sudan government has sought that the arbitration process started in London be withdrawn by OVL to ease the negotiated resolution process, but OVL, had taken a stand that the process, negotiations, as well and arbitration continue in parallel.

However, a section within the Indian government felt that continuing the arbitration and talks were not mutually conducive and legal recourse needed to be terminated to give negotiations the “space to succeed”.

The payment owed to OVL was on account of the Greater Nile Oil Project in Sudan not receiving payment for oil purchased by the Sudan government following the secession of South Sudan.

OVL had acquired a 25% stake in the Greater Nile Oil Project in 2003, along with CNPC, China (40%), Petronas, Malaysia (30%) and the balance with the Sudan government.

However, following the creation of South Sudan, most of the production assets of Greater Nile Oil Project fell within the geographical territory of the new nation, starving the refinery capacities created by the joint venture partners in Sudan.

Part of the amount owned to OVL was also on account of the latter not receiving compensation from Sudan for construction of an oil pipeline and handed over to the Sudan government.

Following the bilateral talks last week, OVL has decided to send a delegation of senior officials to Sudan to re-evaluate technical and commercial details of its investments in Sudan and the impact of crude oil sourced from South Sudan, which, in turn, could pave the way for settlement of oil dues, the OVL statement said.