ONGC Videsh Limited (OVL) has signed a joint venture agreement with Venezuela's state owned oil firm Petroleos De Venezuela S A (PDVSA) to jointly develop a Venezuelan oil field. This follows the Indian government's recent approval of OVL's participation in the project at an investment of $356 million.

Under the agreement, OVL will have a participating interest of 40 per cent,  in the San Cristobal Field in Junin, Orinoco Region of Venezuela for a total investment of $355.7 million dollars comprising sign-on bonus of $173. million. The two companies will jointly develop the field from its current production level of 20,000 bbl per day to 40,000 bbl per day.

Besides, ONGC would also be required to sanction a loan of $355.74 million for the project that covers 160.16 square kilometers and is located in Junin in the Orinoco heavy oil belt of Venezuela, which is in one of the largest known accumulations of heavy oil in the world, covering an area of about 54,000 square km..

The production from San Cristobal field started in October, 1981. Till date 44 wells have been drilled, of which 24 are active. The field currently  produces about 24,000 barrels of oil per day. Ultimate recoverable reserves in the project area have been estimated by a joint team of ONGC and PDVSA at 232.38 million barrels that can yield up to 100,000 barrels of oil per day.

This joint venture will also explore the potential of hydrocarbons exploration in the unexplored area of the project and using enhanced oil recovery (EOR) techniques to improve oil recovery rate in the field, which ONGC has commercialised in its western fields in India.

Venezuela is among the largest oil producers in the world, with about 87 billion barrels of proven conventional oil reserves (OPEC 2006). In addition, it has a huge non-conventional oil deposits (heavy oil), most of which are located in the Orinoco oil belt.

The signing of the agreement yesterday for OVL's participation in the San Cristobal project is expected to open more avenues for bilateral cooperation. OVL has also entered into a technological cooperation agreement with PDVSA CVP for joint research and training activities, under which ONGC has trained a batch of drilling engineers from PDVSA through a customised 25-week long course at Dehradun, and for the first time covered ONGC's deep sea operations.

Present during the signing ceremony were petroleum minister Murli Deora and his Venezuelan counterpart Rafael Ramirez Carreno. Speaking on the occasion Deora expressed the hope that this agreement would pave the way for more such mutually beneficial projects between the two countries.

Deora  and Carreno also discussed possibilities of further cooperation in upstream activities, refinery projects, gas transportation and distribution, and Venezuela's training requirements, as a part of India's efforts to broaden its oil  supplies to secure the country's energy security.

During the visit of Venezuela's President Hugo Chavez to New Delhi in March 2005, the two governments had signed  an agreement for cooperation in the hydrocarbon sector. Further, to strengthen the cooperation between OVL and PDVSA, a memorandum of understanding (MOU) was also signed the same day to jointly develop oil and gas exploration and production projects.