Public sector oil explorer ONGC, which decided to outsource four coal bed methane (CBM) blocks to private players, now wants to add clauses that were not part of the tender document. It is now in a dilemma as there is no consensus on the board on deviating from the tender norms and farming out blocks to inexperienced players.

Great Eastern Energy Corporation Ltd (GEECL), Essar Oil, a consortium of Jindal and Deep Industries Ltd, and Dart Energy have bid for the four blocks located in Raniganj, Bokaro, Jharia and Karanpura.

“Now, ONGC wants the bidders to make a consortium among them,” a source told Business Line.

The tender document was clear — either bid as a single company or form a consortium. “They are trying to change the bidding criteria by saying that in each block, out of the four bidders, we would combine two. So, there would be five companies working on a single block, which is not viable for the CBM business,” the source added. Also, the bidders have been told that the new partner would have to pay a fixed sum to ONGC perpetually over the lifetime of the block. But in the tender document, ONGC had said the new partner coming into the block would only have to proportionately pay the expenses borne by ONGC on the block. Of this, some amount could be paid upfront once production starts.

“This will be like an additional royalty for ONGC. They did not mention this in the tender, which said ONGC will recover the cost spent on the block,” the source said.

The Oil Ministry has asked ONGC to outsource blocks to companies that have experience in CBM projects. At present, GEECL and Essar Oil are the only ones in India that have started pumping out natural gas from CBM blocks.

Overseas player

Overseas player Dart Energy was earlier part of Arrow Energy, a leading player in the CBM business. However, post-acquisition by Shell and Petro-China, Arrow Energy’s non-producing acreages were charted out under a separate entity, Dart Energy. “At present, Dart is different from Arrow and the two do not share any know-how,” the source said.

The ONGC board deliberated on the issue last month when some of its members said it should either not deviate from the clauses mentioned in the tender, or cancel the old tender and call for new bids.

The board is now likely to discuss the issue at its July 10 meeting.

(This article was published on July 5, 2012)
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