The government wants state-owned oil and gas explorer ONGCNSE -1.97 % to carve out non-producing high-potential areas of the prolific Mumbai High and Bassein fields for privatisation, not privatise entire fields, oil secretary Tarun Kapoor told ET.
ONGC produces more than 60% of India’s oil and gas output and has resisted several attempts at privatizing its fields over the past few years.
In the latest move, the oil ministry wrote to ONGC last month, asking it to give away 60% participating interest and operatorship in Mumbai High and Bassein fields to international players.
These two fields, located off the Mumbai coast, together account for half of domestic gas and more than 23% of oil production.
Lower recovery rates in the two ageing fields, slower project implementation by ONGC, and government rules that constrain a public sector enterprise’s functioning were cited as the key grounds for privatization in the ministry’s letter.
The letter – written by an additional secretary – has rattled ONGC executives.
They told ET on condition of anonymity that such suggestions were ‘unfair’ to the company and that the government should instead encourage foreign companies to bid for exploration acreages.
The government is now softening its stand.
Kapoor said the proposal of a 60% stake sale would not apply to producing areas of the two fields.
There is a large scope to develop currently non-producing areas in these fields and private partners with access to advanced technology can help in that, he said.
The government wants ONGC to play an enhanced role in India’s ambition of becoming energy independent by 2047.
For this, it wants the upstream major to go full throttle on exploration and dramatically increase the area under exploration. The government also wants ONGC to privatize smaller fields, and induct partners in bigger, ageing fields where new technologies and the efficiency of private players can help sustain production.
In another shift, the government will “no longer insist” on ONGC hiving off its drilling and well services arm, Kapoor said.
ONGC had opposed this idea, with executives saying that these services were core to the company’s operations and would result in tax liability every time it avails those services.
The government expects ONGC to help build a robust domestic oilfield services industry by taking on more projects quickly and providing local service providers more business opportunities, Kapoor said.
India’s domestic oil production has been declining for a decade, increasing its dependence on imports to 85%.
Foreign oil majors have shown little interest in the Indian exploration sector despite a slew of policy reforms in recent years.
Oil majors, under pressure from climate activists, are shifting capital to non-fossil energy sources or investing in more prolific basins. This leaves the task of raising domestic output to local players, mainly ONGC.
Source : Economic Times
