Imperial Energy had all along been a loss-making proposition to ONGC. Now three and a half years since acquisition, the Indian oil and gas major is planning to consolidate the operations of its Russian outfit in a limited number of fields, so as to cut losses.

According to sources, the initiative that is now under consideration, may find Imperial restricting the operations in three or four better fields as against the existing spread over nearly eight or more fields. The company enjoys a retention price of as low as $19 a barrel from Russia.

Challenging task

“Making money from this asset is a challenging task. We may break even if operations are maintained at 11,000-12,000 barrel from a smaller number of fields. The options are being explored,” an ONGC source told Business Line on condition of anonymity. When contacted, the company Chairman, Mr S. Vasudeva, said: “We are studying the field characteristics in detail, as it is a difficult reservoir with very low permeability. The wells drilled and hydro-fractured by us (in the past) have not given satisfactory results.”

Ruling out options for any major capital investment in Russian asset, he said: “The tax regime does not leave much net back value for substantial capital investment.”

Crude oil factor

ONGC acquired Imperial Energy at a consideration of $2.1 billion (well over Rs 10,000 crore at current exchange value) in 2008.

The bidding took place at a time when crude oil prices were ruling at $122 a barrel before sliding to a record low.

In 2009, the then Chairman, Mr. R S Sharma, blamed the sudden drop in oil prices for the losses incurred by ONGC in Russia and promised to make money from the Siberian asset if crude oil moves beyond $83 a barrel.

The claim was soon proved to be hollow.

The eventual spike in crude prices (well beyond $100 a barrel) proved that ONGC can neither make money from the asset nor is there a taker for the same.

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