Economy

ONGC files arbitration claim against Sudan

Updated : April 17, 2018 12:44 PM IST

At the centre of the dispute is ONGC's 25 percent stake the company acquired in the Greater Nile Oil Project.

ONGC Videsh had expected Sudan to clear the dues after lifting of the U.S. sanctions last year.

ONGC will also file arbitrations for the remaining outstanding amount in due course.

ONGC files arbitration claim against Sudan

The foreign acquisition unit of Oil and Natural Gas Corp's (ONGC) has filed an arbitration claim against the government of Sudan in a London court, a company official said, seeking to recover dues pending for years from a project hit by the breakaway of South Sudan in 2011.

People familiar with the matter in India and Sudan said ONGC had filed a claim for $98.94 million, in what they said was a first for the South Asian nation's top oil and gas explorer against any government. They declined to be identified because they weren't authorised to discuss the matter with media.

At the centre of the dispute is ONGC's 25 percent stake the company acquired in the Greater Nile Oil Project (GNOP) in Sudan in 2003. Other stakeholders include China's China National Petroleum Corp with a 40 per cent stake and Malaysia's Petronas with a 30 per cent share.

"Yes, we have filed an arbitration as our dues have been pending for years," said N. K. Verma, managing director of ONGC Videsh Ltd (OVL). "Notwithstanding this arbitration we will continue to work with Sudan going forward," he said, declining to provide details on the timing and location of any hearings, or the amount being sought.

The current arbitration is only for a part of pending dues that add up to about $425 million, sources said, adding ONGC has sued the government as the contracts were backed by sovereign guarantees.

ONGC will also file arbitrations for the remaining outstanding amount in due course, said a company official, who declined to be identified.

Officials in Sudan said contacts and negotiations with ONGC were being lined up.

"We have addressed the company (ONGC) to show our commitment to serious negotiation and we (have) set up a committee to determine the time frame to pay back the sum in installments," said Bekheet Ahmed Abdullah, under-secretary for Sudan's Petroleum Ministry.

SANCTIONS IMPACT

OVL's stake in the Greater Nile Oil Project (GNOP) comprised Blocks 1, 2 and 4, and the firm also agreed to build a 1,500-kilometre pipeline to Port Sudan on the Red Sea. But in 2011 South Sudan broke away from Sudan, after decades of civil war, and took control of blocks 1A, 1B and a part of block 4.

Meanwhile, because of years of trade sanctions imposed on Sudan by the U.S. - only lifted in 2017 - Khartoum found it difficult to secure oil for its refineries, and asked foreign companies including OVL to sell their share of oil from the blocks to the African nation.

In 2016, OVL signed a separate agreement with Sudan for the sale of its share of GNOP oil. Sudan has not yet paid $90.81 million to ONGC for purchases of oil in 2016 and 2017, according to people familiar with the matter.

ONGC Videsh had expected Sudan to clear the dues after lifting of the U.S. sanctions last year.

"We are committed to pay the money but due to the sanctions imposed on Sudan, we are facing problems in making payment," said Sirajuddin Hamid Yousuf, Sudan's ambassador to India.

"The sanctions were eased on Oct. 12, 2017 but we still cannot have normal banking transactions with India and others," he said.

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