Resource Digest - - MINING -

State-run Oil and Nat­u­ral Gas Cor­po­ra­tion (ONGC) may bid for some of the smaller fields it ear­lier sur­ren­dered as un­vi­able fol­low­ing the un­veil­ing of a new gov­ern­ment pol­icy to de­velop mar­ginal oil and gas blocks.

The gov­ern­ment plans to auc­tion 69 mar­ginal fields this fis­cal year un­der a new pol­icy that al­lows pro­duc­ers to sell gas at mar­ket price; share rev­enue, not profit, with gov­ern­ment; and ex­plore all forms of hy­dro­car­bon with just one li­cence for the block.

Th­ese blocks in­clude 63 dis­cov­er­ies made ear­lier by the ONGC, which didn't de­velop th­ese blocks cit­ing their unviability. But with pric­ing free­dom given to the po­ten­tial op­er­a­tors of the mar­ginal blocks, DK Sar­raf, chair­man of ONGC, said some of th­ese blocks may be vi­able.

“They were not vi­able then. But with a new pol­icy, some of th­ese may be at­trac­tive now. We will do the fi­nan­cial mod­el­ling again and wher­ever it's fi­nan­cially vi­able, we will also bid,“Sar­raf said. ONGC would be com­pet­ing with pri­vate oil com­pa­nies to de­velop th­ese fields. The gov­ern­ment hopes to at­tract pri­vate and for­eign bid­ders to the auc­tion de­spite an oil price crash that has dis­cour­aged many firms from tak­ing up new projects. A lower oil price has also re­sulted in a sharp re­duc­tion in the oil­field ser­vices rates, bring­ing down field de­vel­op­ment costs and might spur in­vest­ments in some cases.

ONGC, in the mean­time, is also spend­ing heav­ily on de­vel­op­ing its other fields, ear­mark­ing about `35,000 crore in cap­i­tal ex­pen­di­ture for the cur­rent fis­cal year. “We be­lieve that this is the best time to in­vest be­cause costs are lower. We must understand that crude oil and gas prices are cycli­cal,“Sar­raf said, while ad­mit­ting that at cur­rent gas prices, de­vel­op­ing deep wa­ter blocks is ‘chal­leng­ing’.

Sar­raf said the dis­pute be­tween ONGC and Reliance In­dus­tries over the ex­ploita­tion of the com­pany's gas re­serve in the KG Basin can get re­solved only af­ter the con­sul­tant ap­pointed to in­ves­ti­gate the mat­ter sub­mits its re­port by Oc­to­ber. “If the re­port says our re­serves are not con­tigu­ous with Reliance's, that means our re­serves are in­tact,” Sar­raf said. The court has asked the gov­ern­ment to re­solve the is­sue within six months of re­ceiv­ing the con­sul­tant's re­port. ONGC had ear­lier ac­cused Reliance of draw­ing gas from its re­serve. ONGC's over­seas arm, ONGC Videsh, is, mean­while, on course to meet its pro­duc­tion tar­get of 20 mil­lion met­ric tonne of oil equiv­a­lent (MM­toe) by 2018-19, its man­ag­ing di­rec­tor said, bank­ing mainly on the re­cent stake buy in a Rus­sian field, hopes of re­ceiv­ing the rights to de­velop Farzad field in Iran, and more ac­qui­si­tions.

“We will be able to meet our tar­gets,” NK Verma, man­ag­ing di­rec­tor, said. In the last fis­cal year, ONGC Videsh pro­duced 8.87 MM­toe, barely 6% more than in 2013-14. But a 15% stake pur­chase for $1.27 bil­lion in the Vankor field in Rus­sia, an­nounced re­cently will sub­stan­tially add to the com­pany's cur­rent year pro­duc­tion. Its share from the Vankor field will be about 66,000 bar­rels daily, al­most 40% of ONGC Videsh's to­tal out­put, Verma said.

ONGC Videsh is also hop­ing to get the rights to de­velop and pro­duce from the Farzad field in Iran. The com­pany has sub­mit­ted an in­te­grated de­vel­op­ment plan for the field, in­clud­ing the pro­duc­tion and the evac­u­a­tion plan, to the Ira­nian au­thor­i­ties, Verma said, adding that the Ira­nian of­fi­cials will be in In­dia in a couple of weeks to dis­cuss the fine print. If ONGC Videsh gets to de­velop th­ese fields, it would take 3-4 years to bring it to pro­duc­tion.

The com­pany is also plan­ning to ac­quire more as­sets over­seas as fall­ing oil prices have made avail­able as­sets cheap and there is a gov­ern­ment push to gain in­creased ac­cess to over­seas as­sets for the coun­try's en­ergy se­cu­rity.

“This is the right time. And we will con­tinue to eval­u­ate op­por­tu­ni­ties for ac­qui­si­tion in the right lo­ca­tions,“Verma said.

ONGC Videsh cur­rently has 36 projects in 17 coun­tries across the globe. About 13 of th­ese projects are al­ready pro­duc­ing.


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