The government has decided to take back several of ONGC’s small and marginal hydrocarbon fields where it has made little headway and auction them afresh with attractive incentives, in keeping with its plan to pick low-hanging fruit for increasing the country’s oil and gas output.
While ONGC has 165 marginal fields (86 onshore and 79 offshore), only 74 are currently under production. As many as 26 are lying idle while another 65 are said to be at various stages of development. These marginal fields have estimated total reserves of 1,510 million tonnes of oil equivalent (mtoe). Of this, nearly 340 mtoe is recoverable hydrocarbon.
The proposal to auction all the 26 idle fields and the majority of fields yet to be fully developed would be separate from the tenth round of bidding under the New Exploration Licensing Policy (NELP), a senior official told FE.
“The ministry is preparing a package of fiscal incentives to make these small oil and gas fields viable. Once the Cabinet clears the policy, the blocks would be auctioned,” the official added.
The process of identifying the blocks for re-auctioning has already started and would be finalised once ONGC surrenders them.
In FY14, only 7.19% of ONGC’s standalone crude oil production and 13.74% of its gas output came from marginal fields.
Petroleum minister Dharmendra Pradhan targets to up hydrocarbon output from domestic fields by exploiting the marginal fields, a strategy he believes would yield immediate results.
The Maharatna explorer is finding it difficult to put these acreages under production since they are ‘not economically viable’ at the prevailing hydrocarbon price.
DK Sarraf, chairman and managing director of ONGC, refused to comment.
According to industry watchers, the gas drilled from marginal fields not connected to the pipeline network could be filled into cylinders and transported. The life of these fields would be less than a decade and, of this, four-five years would yield higher production.
Earlier, ONGC had sought a market-driven price for the hydrocarbon produced from its marginal fields. This means the company wants these fields to be exempted while forking out subsidy for compensating oil-marketing companies.
The ONGC board, under former chairman and managing director Sudhir Vasudeva, had decided to bid out 26 marginal fields comprising six in KG onshore, seven in Western onshore and 13 fields in Western offshore to private explorers as ‘service contracts’ under a fixed international pricing model. However, fluctuations in net realisation because of the higher subsidy burden did not allow the government firm a go-ahead.
In FY14, ONGC saw its highest-ever oil subsidy bill of Rs 56,384 crore. In the last fiscal, the Maharatna firm sold every barrel of crude oil for $106.72. However, it has to bear a subsidy of $65.75/barrel to compensate state-owned oil marketing companies, leading to a net realisation of just $40.97 a barrel.
India’s biggest exploration company saw its standalone crude oil output fall from 24.67 million tonne in FY10 to 22.25 million tonne in FY14. Similarly, gas output has increased marginally from 23.11 billion cubic metres in FY10 to 23.28 billion cubic metres in FY14.