A subtle war seems to be brewing between ONGC and the Directorate General of Hydrocarbons (DGH) on the latter’s proposal to involve private players in enhancing output from fields given to the public sector explorer prior to licensing rounds.

While the DGH proposal seems to have found favour within the Ministry for Petroleum & Natural Gas, it seems to have unnerved the PSU explorer, which believes that this is will send a negative signal to the investors as it will question the competence of ONGC. As the Ministry proposes to move Cabinet, ONGC proposes to knock at the doors of the Prime Minister’s Office.

Pushing ONGC to perform, the DGH is coming out with a mechanism for production enhancement, wherein the PSU can either get a service contractor – technical expert – or form a joint venture with another player having an expertise.

“All we are proposing is that ONGC or Oil India could farm-out some stake and bring in technical and financial assistance to enhance output,” Atanu Chakraborty, Director-General, Directorate General of Hydrocarbons, told BusinessLine.

Farm-out is a common practice in global oil and gas space, where the contractors bring in a partner based on specific agreements, which includes taking financial risk.

But, Sanjay Goel, President Association of Scientific and Technical Officers (ASTO) Central Working Committee, counters this. “If it is about technology induction then give us the powers to do so. Allow us to get a partner directly. Nowhere is a partner brought in through a tendering process, but that is the practice in ONGC right now. This proposal is challenging ONGC’s competence,” he said.

However, Chakraborty said that the mechanism will be very transparent and based on revenue sharing model.

To increase country’s oil and gas output the government has been redefining the policy and relaxing the regulatory regime.

Some of the decisions include policy to grant relaxation, extension and classifications at the development and production stage for early monetisation of discoveries; Discovered Small Field Auction rounds; Unified Licensing Policy – new Hydrocarbon Exploration Licensing Policy; mechanisms to grant extension to small and medium-sized discovered fields; and marketing freedom for gas produced from deepwater and ultra-deep.

Almost 70 per cent of ONGC’s production comes from nomination fields. About 69 per cent of the country’s producing sedimentary basin belong to ONGC and Oil India on nomination basis and only 13 per cent is under production sharing contract with other players. According to DGH, the output from these fields since 2006 has decreased for oil, while gas has been stable.

In fact, the DGH is confident that this move will help increase output by at least 5-7 per cent. This will also bring the Ministry closer to meeting the target set by Prime Minister Narendra Modi of bringing down import dependence by 10 per cent by 2022.

comment COMMENT NOW