Mumbai, Aug 8: The Oil and Natural Gas Corporation could be compelled to work on a larger chunk of the Nelp (new exploration licencing policy) blocks as response from global oil companies to the bidding process has reportedly been lukewarm. The bids will be opened on August 18 and top sources hinted that barely four MNCs have shown any interest in working on the 48 blocks under review.The ONGC, in that case, will have no option but to take up these blocks either on its own or in a joint venture with another oil PSU. The Gas Authority of India and Indian Oil Corporation have already expressed their interest in teaming up with ONGC for some blocks where the upstream major will hold a majority stake.
"ONGC will partner either Gail or IOC in specific blocks where it will hold 50 per cent equity. There is no possibility of a three-way arrangement between these companies. As for other blocks, ONGC will go on its own and it is up to Gail and IOC to decide whether they want to adopt a similar approach," sourcessaid.
The lacklustre reaction of the MNCs to the Nelp bids is surprising given that there are some tanglible benefits on offer. These include:
National oil companies-ONGC and Oil India-to compete with private companies for securing petroleum exploration licences; Level-playing field for the PSUs by paying them international market price of oil; No state participation and, therefore, no carried interest in the venture; Sedimentary basins, both offshore and onshore, to be divided in grids. The companies may propose the block area for consideration by the government. This will give flexibility to the oil companies in relation to the selection of area and timing;
Separate and more attractive fiscal regimes for deepwater and frontier areas; Provision for adjustment in royalty in case of economically marginal fields; Progressive fiscal regime which will avoid fiscal "deterrence"--that is, a field which is viable on pre-tax basis should be viable to thecompanies for exploitation on a post-tax basis also.It would be in ONGC's interests if there is a good response from the global oil majors as it would help it focus better on other crucial areas like refining, marketing and power. The ministry of petroleum and natural gas has made it categoric that ONGC will have to give top priority to its key strengths of exploration and production before considering a diversification into other petro-related activities.
"This would be really unfortunate as the whole objective of a crossholding arrangement with IOC was to work towards becoming an integrated oil company. ONGC will have little to prove five years down the line if it still has not understood the basics of key downstream functions," experts say.
The navratna is also of the view that it has a healthy debt-equity ratio to be able to diversify into other areas. Talks on the subject have already been initiated with the petroleum ministry and a decision is expected to be taken during the next few weeks. Theministry wants to ensure that ONGC will have enough funds at its disposal after accounting for a stake in the nine million tonne Paradip refinery being promoted by IOC. The two oil PSUs have begun the process of thrashing out issues relating to marketing products of the refinery. There is every likelihood of ONGC sharing IOC's own infrastructure which presently comprises over 7,000 retail outlets and other installations like depots and terminals. ONGC has always made it clear that its interests in refining would be preceded by ready access to marketing where the real money lies. No decision has, incidentally, been made on the Nagapattinam refinery (in Tamil Nadu) being planned by IOC where ONGC has been invited to participate as partner. Indications are that the upstream major is not too enthusiastic about the idea as both Madras Refineries and Cochin Refineries are expanding capacities which could result in surplus capacity in the region. The Nagapattinam project is scheduled to go on stream after the ninthplan ending 2002. ONGC has also agreed to team up with IOC in the 301 mw power project being commissioned in Panipat. While IOC and Marubeni of Japan will hold 26% each in the plan, the ONGC board has given the go-ahead for a 20 per cent stake. Plans are now afoot for a similar stake in IOC's 500 mw power project in Sawli, Gujarat.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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