Sudan asks ONGC Videsh to withdraw case on unpaid oil dues of over $400 mn

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Sudan has asked ONGC Videsh Ltd to withdraw its case against the African nation in an international arbitration court for recovery of over $400 million in unpaid oil dues, saying it is making efforts to mitigate the default.

OVL, the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), however, wants to continue with the arbitration while the two sides work out a suitable mechanism to resolve the issue, the company said in a statement.

OVL had earlier this year dragged the government of Sudan to a London court to recover dues pending since 2011.

OVL has filed an arbitration claim in a London court to recover about $300 million for oil Sudan bought from its Greater Nile Oil Project and another $98.94 million in unpaid pipeline rent lease.

The Ministerial delegation informed that the Government of Sudan is making sincere efforts to mitigate the issue of default on paying dues to OVL.

"It was informed that the Government of Sudan is hopeful that its economic situation shall be improving henceforth with the recent agreement it reached with the Government of South Sudan on the resumption of crude oil transportation from South Sudan territory through the Heglig-Port Sudan pipeline," it said.

The delegation, the statement issued by OVL said, requested the company to withdraw the arbitration proceedings.

"OVL expressed its happiness for the positive response from Sudan and stated that it is always ready to work with Sudan to find a workable solution to clear the pending dues in a time-bound manner," it said.

OVL, however, was of the belief that "keeping the legal intricacies in view, the arbitration process can continue while both sides work together on a suitable mechanism of resolving the issues".

OVL had in 2003 acquired 25 per cent interest in the Greater Nile Oil Project (GNOP) in Sudan. China's CNPC holds 40 per cent stake in the project, while Malaysia's Petronas has 30 per cent and Sudapet of Sudan owns remaining 5 per cent.

GNOP consisted of the upstream assets of on-land Blocks 1, 2 and 4 spread over 49,500 sq km in the Muglad Basin, located about 780 km South-West of the capital city of Khartoum in Sudan.

The crude oil produced from oil field of GNOP is transported through a 1,504-km pipeline to Port Sudan at the Red Sea.

Upon the secession of South Sudan from Sudan in July 2011, the contract areas of Blocks 1, 2 and 4 which straddle between Sudan and South Sudan was split with a major share of production and reserves are now situated in South Sudan.

Post-secession, as the government of Sudan's share of total production from Sudan was not sufficient to meet requirements of local refineries, foreign firms were asked to sell their share of crude oil to it.

However, the payment of dues on account of crude oil purchased by the government of Sudan has not been received and OVL's share of the outstanding dues is about $300 million.

OVL's share of oil production from GNOP, Sudan was 0.5-0.7 million tonnes.

The company had along with state-owned Oil India Ltd constructed and financed a 741-km multi-product pipeline from Khartoum refinery to Port Sudan for $194 million.

OVL's share of the project cost was 90 per cent, while the rest was borne by OIL.

The pipeline was handed over to the government of Sudan in October 2005. The lump sum price, together with lease rent was required to be paid to OVL in 18 equal half yearly installments effective from December 2005.

While payment of 11 half-yearly installments due till December 2010 was received from the government of Sudan, remaining seven installments due from June 30, 2011, to June 30, 2014, are yet to be released.

OVL, whose share of investment in the project was $158.01 million, has been following up for the realisation of $98.94 million from the government of Sudan at various levels but hasn't succeeded so far.

This prompted the company to drag Sudan to arbitration.

"On the request of the visiting delegation, OVL agreed to depute a team of senior-level officials to Sudan for initiating techno-commercial discussions afresh so as to work out way forward for settlement of past dues," the statement said adding the team of company officials arrived at Khartoum on August 13 and discussions with the Sudanese side are presently ongoing.