THE overseas arm of an Indian state-owned oil and natural gas company is in talks to buy 25% stake in an exploration block off the Falkland Islands according to the New Delhi Economic Times.

The Oil and Natural Gas Corp (ONGC), ONGC Videsh Ltd OVL is in talks to buy the stake from Falkland Oil and Gas Ltd (FOGL) in two exploration blocks, lying 350 miles off the Southern tip of Argentina sources told the Economic Times.

FOGLwill retain operator-ship of the licence

The blocks are located in the south and east Falkland basins in water depths ranging from 500 meter to 2,000 meter. The resources estimate of 15 prospects identified may hold up to 15 billion barrels of oil equivalent or 46 Trillion cubic feet of gas reserves.

Under the terms being discussed with FOGL, OVL would contribute its pro-rata share of 2012 drilling program, comprising two exploration wells. OVL would also pay its pro-rata share of certain historical costs incurred during 2011 related to preparation for drilling this year. The costs incurred are estimated to be 68 million dollars.

OVL would also make a cash payment of 40 million dollars. If the Loligo prospect, where drilling is due this year, turns out to be a gas discovery, a liquefied natural gas (LNG) terminal would be built onshore with a capacity of about 7 million tons per annum for exports to consumption centres like India. But if the reserves are of lesser than quantity, a floating LNG project may be developed, they said.

FOGL plans to drill one exploration well (Loligo) in Phase-1 in the Northern License Area. In Southern Licence Area it has committed to drill one well by December 30, 2015. Under licence terms, a Discovery Area can be held for five years to allow time for appraisal drilling and submission of a development plan, sources said adding exploitation (production) period has been capped at 35 years.

OVL has grown to become the second-largest E&P company in India both in terms of oil production and oil and gas reserve holdings. The primary business of OVL is to prospect for oil and gas acreages abroad including acquisition of oil and gas fields, exploration, development, production, transportation and export of oil and gas.

OVL is a wholly-owned subsidiary of Oil and Natural Gas Corporation Ltd, ONGC), the flagship national oil company of India. It has operations in several Latin American countries: Brazil, Colombia, Cuba and Venezuela.