Government mulls selling 149 fields of ONGC to private & foreign companies

The government is reportedly mulling selling as many as 149 small and marginal oil and gas fields of ONGC to private and foreign companies and allow the state-owned firm to focus only on big fields.

On the anvil is some kind of extension of the Discovered Small Field (DSF) bid round where discovered and producing fields of ONGC are auctioned to firms offering the maximum share of output to the government.

This is the second attempt by the Oil Ministry to take away some of the fields of ONGC for private and foreign companies. In October last year, the Directorate General of Hydrocarbons (DGH) had identified 15 producing fields with collective reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic metres of gas of national oil companies for handing over to private firms in the hope that they would improve upon the baseline estimate and its extraction.

The plan, however, could not go through as ONGC strongly countered the DGH proposal with its own suggestion that it be allowed to outsource operations on same terms as the government plan.

The current plan started as a follow up of the October 12 meeting called by Prime Minister Narendra Modi to review domestic production profile of oil and gas and the roadmap for cutting import dependence by 10 per cent by 2022. At a meeting, the ministry made a presentation showing that while 95 per cent of ONGC’s production was from 60 large fields, 149 smaller fields contributed to a mere five per cent. It was suggested at the meeting that these smaller fields could be given out to private and foreign firms and ONGC could concentrate on the big ones where it could rope in technology partners through production enhancement contracts (PEC) or technical service arrangements. Thereafter a six-member committee under Niti Aayog CEO Amitabh Kant was set up to give a proposal on the same.

ONGC, however, is opposed to the plan as it feels it should be allowed the same terms that the government extends to private and foreign firms in DSF.

The government gave out 34 fields to private firms by offering them pricing and marketing freedom for oil and gas they produced from the fields in the first round of DSF. A second round of DSF with 25 fields on offer is currently under bidding.

The fields offered in DSF were taken away from ONGC and Oil India Ltd. on the pretext that they were lying idle and unexploited. But under the present proposal, the government plans to take away discovered and producing fields.

ONGC feels it too should be allowed to seek revenue sharing partnership for its fields. Field operations could be outsourced to foreign or private firms that offered the highest revenue or production share over and above a baseline production.

The Oil Ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital. It has been tasked by the Prime Mini-ster to cut dependence on oil imports by 10 per cent by 2022 over 77 per cent in 2014-15. But the dependence has only increased and is now over 83 per cent.