Exclusive: India's ONGC, PDVSA aim to raise around $1 billion for Venezuela JV - sources

Tue Dec 16, 2014 2:00pm EST
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By Alexandra Ulmer and Nidhi Verma

CARACAS/ NEW DELHI (Reuters) - India's Oil and Natural Gas Corp and Venezuela's state oil company PDVSA are seeking around $1 billion in credit to stem an output decline at their San Cristobal joint venture, two sources close to the negotiations told Reuters.

Indian banks are poised to lend the money to the joint venture, the sources said, though ONGC would provide the guarantee and the breakdown of the loan's repayment has not yet been decided.

The deal is expected to ensure state-owned ONGC receives between $400 million and $500 million of unpaid dividends that have accrued over five years.

"This could come together next year," one of the sources said of the deal, which seeks to stem San Cristobal's production fall from a peak of over 40,000 barrels per day to around 30,000 bpd.

It is also likely to involve creation of an offshore account, probably in Asia, to receive the export income, guaranteeing ONGC will receive money.

With oil prices tumbling, the likely deal underscores a broader shift toward pragmatism in financially-strapped PDVSA [PDVSA.UL] under new boss Eulogio Del Pino.

The sides have negotiated for more than a year and are close to a deal to overhaul wells, machinery and other items over three to four years to shore up output and change the terms of sales. Crude would be sold to a handful of buyers, likely Indian and Asian, under 10-year agreements, one source said.

The offshore account "will be a like a waterfall mechanism, whereby the revenue from the project ... will then be distributed among partners," said the second source.   Continued...

A worker walks past a mural with a PDVSA logo at its gas station in Caracas August 29, 2014. REUTERS/Carlos Garcia Rawlins