Bloomberg: Russian Shale Beating U.S. Is ONGC’s Last Bet

Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, is banking on the world’s largest shale oil reserves to save its Russian acquisition. Stumbling blocks include oil prices at a five-year low and U.S. sanctions.

Imperial Energy Corp., which the Indian state-run explorer bought in 2009 for 1.4 billion pounds ($2.1 billion), will drill four wells in Russia’s Bazhenov shale formation by July, seeking to find enough oil to start commercial production, said Narendra Kumar Verma, managing director of ONGC’s overseas unit, which owns Imperial. Failure would mean seeking options, including selling the unit, he said.

“We’re banking on that silver lining,” Verma, the chief of ONGC Videsh Ltd., said in an interview in his office in New Delhi. “We have to think of alternative strategies. All options are open,” should Bazhenov flop, he said.

ONGC plans to more than double its oil and gas production from overseas fields in four years even as it seeks to reverse declining output from Imperial’s fields, revive assets in troubled Sudan and Syria and boost output in Venezuela. It gives away 79 percent of its revenue from Imperial’s fields as taxes to the Russian government, which is facing the prospect of defaulting on its debt amid sanctions following the annexation of Crimea from Ukraine.

“At the moment, Bazhenov is the promising thing,” Verma said. “We have to see how much it yields, as shale oil wells are costlier due to horizontal drilling and hydro-fracking.” MORE