Home Northern Africa OVL initiates arbitration proceedings against the Government of Sudan

OVL initiates arbitration proceedings against the Government of Sudan

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  • With mounting payment dues from Sudan, ONGC Videsh Ltd (OVL), as also its Chinese partner CNPC and Malaysia”s Petronas have withdrawn from the oil block, Block 2A&4 in Sudan
  • Sudan failed to pay the dues for the oil it bought from the block to OVL and partners since 2011

With mounting payment dues from Sudan, ONGC Videsh Ltd (OVL), as also its Chinese partner CNPC and Malaysia”s Petronas have withdrawn from the oil block, Block 2A&4 in Sudan. The stakeholding in the Block included OVL with a 25 per cent stake, CNCP 40 per cent, and Petronet 30 percent. Sudapet of Sudan had 5 percent interest.

Sudan failed to pay the dues for the oil it bought from the block to OVL and partners since 2011. Additionally, OVL has to receive about USD 99 million for the 741-km-long pipeline it built from Khartoum to Port Sudan. According to OVL official sources, Sudan’s outstanding dues towards OVL totaled USD 430.69 million. After failing to get any results by using diplomatic channels, the company has terminated the Exploration and Production Sharing Agreement (EPSA) and has initiated arbitration proceedings against the Government of Sudan to recover the dues.

As per the initial agreement, the project cost and rental of USD 254 million was to be paid by Sudan in 18 half-yearly equated instalments of USD 14.135 million each starting from December 30, 2005. The company received a total of 11 installments (USD 155.48 million) till December 2010 and the remaining seven instalments amounting to USD 98.94 million remained pending.

OVL acquired a 25 percent interest in the Greater Nile Oil Project, (GNOP) Sudan in 2003. The upstream assets of on-land Blocks 1, 2, and 4 were located about 780 km South-West of the capital city of Khartoum in Sudan. Trouble started when South Sudan got seceded from Sudan in July 2011. The contract areas of Blocks 1, 2, and 4 which lie between Sudan and South Sudan were split with a major share of production and reserves in South Sudan. After secession, Sudan’s share of total production was not sufficient to meet the requirements of local refineries, and foreign firms were asked to sell their share of crude oil to it. However, the government of Sudan payment failed to pay the dues on account of crude oil purchased the official said.

The US$ 194 million pipeline from Khartoum refinery to Port Sudan was constructed by OVL and the state-owned Oil India Ltd. OVL’s share of the project cost was 90 percent, while the rest was borne by OIL. The project cost and lease rent amounting to USD 254 million was required to be paid to OVL in 18 equal half-yearly installments effective from December 2005

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