Saturday, August 13, 2022

Identify areas for involving private sector as much as possible, Govt tells ONGC

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New Delhi: The government has come out in open in pushing the ONGC, the state-owned oil and gas producer that’s also the country’s largest, to involve private sector companies and service providers wherever possible to help raise oil and gas production. Govt is clear, ONGC has to do more, said Petroleum Secretary Tarun Kapoor on Thursday. Petroleum Secretary's comments came days after the second-highest ranked official in his ministry asked Oil and Natural Gas Corporation (ONGC) to give away a 60 per cent stake plus operating control in India's largest oil and gas producing fields of Mumbai High and Bassein to foreign companies.

ONGC in 2019 had said that it has planned to double its oil and gas production both in India and its overseas fields by 2040. This was a bold claim from a company whose oil production had already been on the decline for six years. This may briefly explain why the govt is mistrustful of ONGC. India imports 85 percent of the oil its economy needs. It had planned to reduce that to 67 percent by next year, but that looks quite impossible today. Especially when India’s demand for oil is expected to grow 5.1 percent on average every year compared to a global average of just 0.9 percent.

"ONGC has to explore more so that it can discover more oil and gas reserves and bring them quickly to production to raise domestic output. The government is very clear that ONGC has to do more," he said speaking to Media on Thursday here in New Delhi. "Naturally, when they do more work, there are areas where they can get experts in the fields… such as in deepsea," Kapoor said.

Discoveries that the company hasn't been able to develop or areas that it hasn't been able to explore are some of the examples where the ONGC can involve the private sector and foreign companies.

ONGC, he said, should identify areas where it can get private sector expertise and efficiencies. These could range from technical collaboration to giving partially explored and undeveloped discoveries to private firms. The private sector can also be involved in enhancing production from existing fields.

"We have only made suggestions to ONGC… the government cannot give directive to a Maharatna company. The ultimate decision has to be taken by the company board," he said.

India's premier news agency PTI reports that Amar Nath, additional secretary (exploration) in the Ministry of Petroleum and Natural Gas, on October 28 had written a 3-page letter to ONGC Chairman and Managing Director Subhash Kumar, saying productivity of the Mumbai High and Bassein & Satellite (B&S) offshore assets under state-owned firm was low, and international partners should be invited and given 60 percent participating interest (PI) and operatorship.

This is the second time since April that Nath, who is part of the ONGC management as the longest-serving government nominee director on its board and often considered a potential candidate to replace Kumar next year, has written an official letter, painting a poor picture of the company's performance. In the letter Amar Nath has written that the redevelopment projects will raise recovery of the mature and continuously declining Mumbai High field from 28 percent to 32 percent, "which is quite low".

Mumbai High, which was discovered in 1974, and B&S that was put into production in 1988 are Oil and Natural Gas Corporation's (ONGC) mainstay assets, contributing two-thirds of its current oil and gas production. Without these assets, the company will be left with only smaller fields.

Nath had on April 1 written to Kumar to sell stake in producing oil fields such as to Ratna R-Series to private firms, get foreign partners in KG basin gas fields, monetise existing infrastructure, and hive off drilling and other services into a separate firm to raise production.

The two letters by Nath are the third attempt by the oil ministry to get ONGC to privatise 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 ONGC 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, news agency PTI has reported quoting sources who are aware of the matter. The second plan went to the Cabinet, which on February 19, 2019, decided to bid out 64 marginal fields of ONGC. 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.

Nath in both April 1 and October 28 letters stated that two years have elapsed since the Cabinet decision but ONGC is yet to initiate the process for partnerships.

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 bcm of gas in 2020-21, down from 23.74 bcm in the previous year and 24.67 bcm in 2018-19. (Courtesy News Source: PTI)

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