ONGC scouts for global partners to take on Reliance in Nelp VII

ONGC scouts for global partners to take on Reliance in Nelp VII

INDIA’S largest public sector enterprise Oil and Natural Gas Corporation (ONGC) is in talks with global energy giants such as British Petroleum, BG Group, Brazil’s federal energy company Petroleo Brasileiro (Petrobras) and ENI of Italy to jointly bid for blocks proposed to be offered under the New Exploration and Licensing Policy (Nelp). The government plans to offer 70 blocks covering around three lakh square kilometers in the seventh round of Nelp in August.

The ONGC consortium will go head-to-head with Reliance Industries (RIL), which has been an aggressive and successful bidder. The Mumbai-based firm is likely to team up with US energy major Chevron Corp for the bids.

During Nelp VI, the government attracted 16 5 bids for 5 5 blocks on offer with ONGC and RIL bagging most of the lucrative deepwater blocks. ONGC walked away with 24 blocks and while seven blocks were awarded to RIL.

“We are in talks with global players such as BP, Petrobras and ENI for jointly submitting bids in Nelp VII. We will decide on the blocks at the last moment. We are also in talks with some of these firms to jointly develop our recently discovered gas block in the KG basin,” ONGC director-offshore N K Mitra told ET.

For ONGC, tie-up with a foreign firm’ is essential as BE BG, ENI and Petrobras have expertise in deepwater exploration and ONGC often seeks their help in searching for hydrocarbon reserves in the deep waters of India. Some of the recent discoveries by RIL, GSPC and ONGC have brought the KG basin in the global hydrocarbon map with global players keen to bid for blocks in the hydrocarbon rich basin. ONGC plans to double its hydrocarbon reserves to 6 billion tonne of oil and oil equivalent gas (O+OEG) and plans 4 billion tonne to come from deep waters.

ONGC holds 57.2% of the country’s total hydrocarbon acreage and contributes 84% of India’s domestic oil and gas production. However, ONGC has been unsuccessful in finding any major discovery in the last many years. Its recent gas discovery in the KG basin has not yet been approved by the government.

India imports about two-thirds of its crude oil requirement. Exploration and production (E&P) of oil and gas is critical for India’s energy security and economic growth. India’s share is a meagre 0.5 % of global oil reserves of 1,189 billion barrels, while it consumes 3.2 % of global oil consumption every year. The growing demand for crude oil and gas in the country and policy initiative of the government towards increased E&P activity, have given a great impetus to the Indian E&P industry raising hopes of increased exploration. The efforts have resulted in a number of oil and gas discoveries in India and have changed the perception and prospects of the Indian sedimentary basins and the focus on Indian E&P Industry.

Nelp VII, will be the last round under Nelp bidding policy and is likely to witness one of the most fierce competition in the sector as the government is planning to move to Open Acreage Licensing Policy (OALP), which gives companies a round-the-year window to pitch for oil and gas in blocks of their choice.

ONGC and RIL have also been discussing with the government to allow them to bid for the 10 blocks relinquished by them in the past two years. The Directorate General of Hydrocarbons (DGH), the upstream regulator, has proposed that ONGC and RIL be barred from bidding for the 10 blocks for not fulfilling the minimum work programme. The blocks were won by the companies in earlier rounds but were taken away after the government discovered that they had not completed the minimum work programme.

An interesting part of the Nelp VH bidding will be the three pre-Nelp Krishna Godavari (KG) basin blocks, earlier owned by ONGC and in which BG was offered joint operator ship through international competitive bidding in 2005. The companies had to surrender the blocks after the DGH said that they had not done the work programme within the stipulated time.

While ONGC-BG will bid for these blocks again, it will also draw interest from host of other players including RIL. The government is now examining the option of giving ONGC-BG a chance to match the highest offer of any other bidder after hectic lobbying by the companies and the government-appointed investment commission.
GAIL India (GAIL) is gearing up to team with overseas mid-sized firms from Canada, US, UK and Australia. Anil Ambani-owned Reliance Natural Resources (RNRL) has also shown keen interest in Nelp VII round and is also believed to have sounded out some international firms. About 36 companies from 17 countries participated in the Nelp VI round of bidding.

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