GoM to discuss proposal to privatise 97 oil, gas fields

NEW DELHI: A group of ministers (GoM) is scheduled to meet on Monday to consider privatisation of 97 oil and gas exploration blocks currently held by staterun Oil and Natural gas Corporation (ONGC) and Oil India Ltd (OIL), two officials aware of the development said.

The GoM, chaired by finance minister Arun Jaitley, will hold its first meeting on February 18 to deliberate proposals of a highlevel committee that recommended privatisation of hydrocarbon blocks to ramp up India’s oil and gas output, the government officials said requesting anonymity.

Other members of the GoM are ministers of coal, commerce, power, and petroleum, they said.

The GoM was initially scheduled to meet last week, but the meeting was postponed after the Department of Expenditure in the Finance Ministry sought specific details related to revenue implications for the government if these blocks are auctioned to the private companies, one of the officials said. The second official said ONGC and OIL may be asked to initiate the auction process instead of the petroleum ministry inviting the bids, which would avoid unnecessary criticisms that the government is divesting assets of state-run firms at the end of its five-year tenure.

HT reported on February 13 that ONGC and OIL may also lose additional 52 fields unless staterun energy firms improve exploration and production efforts in these fields. The committee has identified 149 blocks to be privatised. While 97 are expected to be auctioned immediately after the GoM’s decision, ONGC and OIL will issue a notice for the other 52.

The proposal is based on a report prepared by a high-level committee headed by NITI Aayog vice-chairman Rajiv Kumar. Other members of the panel are cabinet secretary PK Sinha, oil secretary MM Kutty, department of economic affairs secretary Subhash Chandra Garg, ONGC chairman Shashi Shankar, and NITI Aayog CEO Amitabh Kant.

“In these [52] retained fields, NOCs [national oil companies] need to adhere to approved production profile. If they fail, even these fields shall be considered for taking back and privatisation by the government,” the sixmember committee said in its report, which HT has seen.

The committee had submitted its report, Enhancing Domestic Oil & Gas Exploration and Production, to the government last month. Out of the 52 fields, ONGC currently holds 49 fields and OIL three. There were no responses to queries sent to the oil ministry, ONGC and OIL.The panel also suggested that ONGC and OIL forge joint ventures (JV) with private entities in 66 lucrative oil and gas producing fields to enhance output from these blocks. “It is necessary that recovery maximisation regime is adopted by NOCs and if need be, choose field specific implementation model including JV to make it possible to recover the additional oil expeditiously,” the committee said in its report. These 66 fields contribute about 95% of India’s total oil (35.7 MMT in 2017-18) and gas (32,648 MMSCM) production. The committee, in its report, has expressed concerns over surging oil and gas consumption, which are resulting in higher energy imports (82.8% of total oil consumption and 45.3% in the case of gas). The total value of imports was ₹4,79,377 crore in 2017-18.

The report has pointed to two major dampeners for private investments — “poor geology” of Indian sedimentary basins and policy focus on maximising revenue from oil and gas fields.

“...Hitherto instead of compensating for the poor geology, Indian policy has focused on maximising government revenues,” it said. “It has been highlighted by the ...experts in the meeting with the Hon’ble PM that our existing policy framework, fiscal and approval regimes would have to be made more attractive for both FDI and domestic investments.”

A former board member of ONGC, who did not wish to be named, said, “This is nothing but asset stripping. Both ONGC and OIL are listed entities and this move will adversely impact the interests of the minority shareholders.” Requesting anonymity, a former oil secretary said, “OIL and ONGC cannot hoard blocks...It is prudent to involve technologically-sound private players with deep pockets.”