India’s plan to privatise 15 oil and gas blocks runs into opposition

KOLKATA (miningweekly.com) – National exploration and production (E&P) major ONGC is opposing the Indian government’s plans to offer private investors a controlling interest in 15 oil and natural gas blocks held by government-owned entities.

Senior ONGC technologists and officials have taken up the issue with the Prime Minister’s Office, claiming handing over the 15 discovered oil and natural gas blocks will be counter-productive and will not achieve the stated goal of boosting production.

ONGC’s opposition and raising the issue at the highest level has brought the national E&P in direct conflict with the Director General for Hydrocarbons (DGH), which prepared the rules for transferring the oilfields from the State to private investors as part of a strategy to enhance production levels from already producing oil and gas fields.

“The partner selected for enhancing production work under the model shall acquire 60% of the farm-in interest in the field on payment of an upfront bonus in the competitive bidding process and shall operate the field for the entire duration of the production enhancement contract, which is currently pegged at 20 years or remaining life of the field, whichever is earlier,” the DGH had proposed.

As per the guidelines framed, a successful bidder will be based on equal weightage on total investment committed by the latter over a period of ten years and the largest share of revenue will be offered to the government.

Of the 15 oil and natural gas blocks, 11 were currently operated by ONGC and four by government-owned and operated, Oil India.

ONGC has pointed out that most of the 15 oil and gas blocks have been in operation for more than 30 years and that a fall in production levels from such ageing assets was expected.

Expressing skepticism about whether any private operator will be successful in reversing the trend, ONGC technologists have cited the example where oilfields have been returned by a consortium of private operations as the contract could not be finalised.

If falling production levels is to be a criteria for changing an operator of an asset, the norm should be uniformly applicable to all oil and gas fields currently in production by government and private oil companies instead of selective application of low production norms, ONGC officials have argued.