The Hindu Business Line : Marginal fields: ONGC told to review package

New Delhi, Oct. 4 The Petroleum Ministry has asked state-owned Oil and Natural Gas Corporation Ltd (ONGC) to review its existing mechanism for development of marginal fields which would result in offering attractive fiscal packages for the service contractors.

Currently, the company enters into service contracts with companies having expertise in development of marginal fields through a bidding process.

Sources told Business Line that a substantial amount of hydrocarbon is locked up in marginal fields and as these fields cannot be produced economically on a standalone basis, or with a conventional approach, the best possible way to exploit the full potential is when outsourced to smaller companies.

Under the current dispensation, ONGC finds it tough to attract bidders, as the fiscal package offered to the service contractors is not very lucrative, sources said.

“Besides, keeping in mind the subsidy element, the company has to also provide for cess and royalty from these fields. There is also a cap of $35 a barrel on the crude pricing from these fields,” sources said.

By a cap of $35 a barrel, it is meant that whatever be the international crude prices, the price of oil produced from marginal fields cannot be above $35 a barrel.

“This makes the offer not very attractive for the prospective bidders, as all development cost has to be borne by the contractor,” sources said.

The Petroleum Ministry has also asked the Directorate General of Hydrocarbons (DGH), who monitors the blocks awarded under the New Exploration Licensing Policy (NELP) rounds, to work out a formula for the exploration major that would yield better results from the fields.

Marginal fields have low oil and gas reserves which are economically viable when produced with low capital cost and overheads. With the changing world oil price scenario, innovative technologies and liberal Government regulations, the development of marginal fields has assumed importance for increasing production and profit.

ONGC has produced 0.49 million tonne crude oil and 22.6 million standard cubic metre of gas from the marginal fields in 2006-07.

The company holds 165 marginal fields – of which 79 are offshore and 86 are onshore. Out of these 165 fields, 63 are already monetised, 71 are under monetisation and 31 are monetised.

ONGC has initiated action to put about 96 per cent reserves of marginal fields on production in the Eleventh Plan.

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