Oil ministry tells ONGC to sell oilfields; hive off drilling, other services

Apr 27,2021

The petroleum ministry has told India's largest oil and gas producer Oil and Natural Gas Corporation (ONGC) to sell stake in producing oil fields such as to Ratna R-Series to private firms, get foreign partners in KG basin gas fields, monetize existing infrastructure, and hive off drilling and other services into a separate firm to raise production.

Amar Nath, additional secretary (exploration) in the Ministry of Petroleum and Natural Gas, on April 1 wrote to Oil and Natural Gas Corporation (ONGC) Chairman and Managing Director Subhash Kumar giving a seven-point action plan, 'ONGC Way Forward' that would help the firm raise oil and gas production by one-third by 2023-24.

The action plan, reviewed by PTI, calls on Oil and Natural Gas Corporation to consider the sale of a stake in maturing fields such as Panna-Mukta and Ratna and R-Series in western offshore and onshore fields like Gandhar in Gujarat to private firms while divesting/privatizing 'non-performing marginal fields.

It wanted ONGC to bring in global players in gas-rich block KG-DWN-98/2 where output is slated to rise sharply by next year, and the recently brought into production Ashokenagar block in West Bengal. Also identified for the purpose is the Deendayal block in the KG basin which the firm had bought from Gujarat government firm GSPC a couple of years back.

The ministry also wants the company to explore creating separate entities for drilling, well services, logging, and work over services, and data processing entities.

This is the third attempt by the oil ministry to get ONGC to privatize its oil and gas fields under the Modi government.

In October 2017, the Directorate General of Hydrocarbons, the ministry's technical arm, had identified 15 producing fields with a collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic meters of gas, for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction.

A year later, as many as 149 small and marginal fields of Oil and Natural Gas Corporation were identified for private and foreign companies on the grounds that the state-owned firm should focus only on big ones.

The first plan couldn't go through because of strong opposition from ONGC, sources aware of the matter said.

The second plan went up to the Cabinet, which on February 19, 2019, decided to bid out 64 marginal fields of Oil and Natural Gas Corporation. But, that tender got a tepid response, they said adding that ONGC was allowed to retain 49 fields on the condition that their performance will be strictly monitored for three years.

The ministry note of April 1, 2021, said two years have elapsed since the Cabinet decision, and non-performing fields need to be identified for divestment and privatization.

It suggested market-friendly bid terms such as lower royalty rates and complete marketing and pricing freedom.

For medium-sized producing fields, the action plan wanted ONGC to identify maturing fields such as Panna-Mukta, Ratna, and R-Series in western offshore and Gandhar in Gujarat as well as fields such as Daman in western offshore which had upcoming development plans, for the stake sale.

It also wanted ONGC to consider developing new business models for monetization of stranded assets/discoveries such as design, finance, built and operate as well as annuity and securitization based models for development. Fields such as GK-28/42 and all unmonetized discoveries, either individually or as a bouquet, were identified for the purpose, the document showed.

The note said that to reduce dependence on the import of crude oil and gas, the ministry has set the domestic production target of 40 million tonnes of crude oil and 50 billion cubic meters () of natural gas by 2023-24. The bulk of the targeted domestic production for 2023-24 is expected to come from ONGC, which is required to contribute 70 percent of the domestic production (28 million tonnes of oil and 35 billion cubic meters of gas by 2023-24).

It said the share of ONGC contribution in the oil and gas consumption of the country is decreasing continuously as its production is stagnant or decreasing for a long time. As a result import dependency is increasing.

ONGC produced 20.2 million tonnes of crude oil in the fiscal year ending March 31 (2020-21), down from 20.6 million tonnes in the previous year and 21.1 million tonnes in 2018-19.

It produced 21.87 billion cubic meters of gas in 2020-21, down from 23.74 billion cubic meters in the previous year and 24.67 billion cubic meters in 2018-19.

Latest News