To increase production, India’s largest oil and gas producer, ONGC, has been told to sell stakes in producing oil fields such as the Ratna R-Series to private companies, seek foreign partners in the KG basin gas fields, monetise existing infrastructure, and separate drilling and other services into a separate company.
On April 1, Amar Nath, additional secretary (exploration) in the Ministry of Petroleum and Natural Gas, wrote to Oil and Natural Gas Corporation (ONGC) Chairman and Managing Director Subhash Kumar with a seven-point action plan titled “ONGC Way Forward,” which would help the company increase oil and gas output by one-third by 2023-24.
According to the action plan, ONGC should consider selling stakes in maturing fields like Panna-Mukta and Ratna, as well as the R-Series in western offshore and onshore fields like Gandhar in Gujarat, to private firms, thus divesting/privatizing ‘non-performing’ marginal fields.
It wanted ONGC to bring in global players in the gas-rich block KG-DWN-98/2, where performance is expected to skyrocket by next year, and the West Bengal block Ashokenagar, which was recently brought into production. The Deendayal block in the KG basin, which the company purchased from Gujarat government firm GSPC a few years ago, has also been listed for the purpose.
In addition, the ministry wants the business to look into forming separate agencies for exploration, well services, logging, workover services, and data processing. This is the oil ministry’s third attempt to persuade ONGC to sell its oil and gas fields during the Modi administration.
In October 2017, the ministry’s technical arm, the Directorate General of Hydrocarbons, listed 15 producing fields with a total reserve of 791.2 million tonnes of crude oil and 333.46 billion cubic metres of gas, for handing over to private companies in the hopes of improving on the baseline estimate and extraction.
A year later, ONGC’s small and marginal fields were established for private and foreign firms, despite the fact that the state-owned company could only concentrate on large ones. According to sources familiar with the matter, the first attempt was thwarted due to strong resistance from ONGC. The second proposal was presented to the Cabinet, which agreed on February 19, 2019, to auction off 64 ONGC marginal fields. However, they mention that the tender received a lukewarm response, and that ONGC was allowed to keep 49 fields on the condition that their output be closely monitored for the next three years.
Two years have passed since the Cabinet decision, and non-performing fields must be listed for divestment and privatisation, according to a ministry note dated April 1, 2021. It proposed bid terms that would appeal to the market, such as lower royalty rates and full marketing and pricing flexibility. The action plan called for ONGC to recognise maturing fields like Panna-Mukta, Ratna, and R-Series in the western offshore and Gandhar in Gujarat, as well as fields like Daman in the western offshore with upcoming development plans, for stake sale.
It also requested that ONGC consider developing new business models for monetising stranded assets/discoveries, such as design, finance, build, and run, as well as annuity and securitization-based growth models. The document revealed that fields like GK-28/42, as well as all unmonetised findings, were listed for the reason, either individually or as a bouquet.
According to the note, the ministry has set a domestic output target of 40 million tonnes of crude oil and 50 billion cubic metres (bcm) of natural gas by 2023-24, to minimise reliance on imports of crude oil and gas. The majority of the domestic production targeted for 2023-24 is expected to come from ONGC, which is expected to contribute 70 percent of the domestic production. (By 2023-24, 28 million tonnes of oil and 35 billion cubic metres of gas will have been produced.)
ONGC’s contribution to the country’s oil and gas consumption is steadily decreasing because its output has been stagnant or declining for a long time. As a result, import reliance is growing. In the fiscal year ending March 31 (2020-21), ONGC produced 20.2 million tonnes of crude oil, down from 20.6 million tonnes the previous year and 21.1 million tonnes in 2018-19. It generated 21.87 billion cubic metres of gas in 2020-21, down from 23.74 billion cubic metres the previous year and 24.67 billion cubic metres in 2018-19.
