Govt plans to sell a 60% stake in 15 ageing oil field to private firms
Eleven of these oil fields are owned and operated by the Oil and Natural Gas Corporation (ONGC) and four by Oil India Ltd (OIL). Their proven reserves are estimated at 791.2 million tonnes of crude oil and 333.46 billion cubic metres of gas cumulatively. Four of these fields – Kalol, Ankleshwar, Gandhar and Santhal – are considered major producing fields – all located in Gujarat.
They were selected for part-privatisation out of a review of 202 fields operated by the national oil companies. The fields chosen are ones that hold reserves of 20 or more million tonnes of oil equivalent and have crossed the half-way mark on a score (indicative of poor field performance) combining exploration index, current recovery and production decline rate in the last three years. Of the 202 fields, 141 are either less than 10 years of age or had shown some positive change in the year-on-year production rate.
All of the15 fields, proposed to be put up on sale, are located in blocks or areas given to national oil companies on the nomination basis, which does not allow a private entity to take a stake in nomination blocks. India allows private interests to participate in blocks and areas awarded under New Exploration Licensing policy (NELP) since 1999. However, only exploration acreage was auctioned under global bidding in such rounds. All areas prior to that were given to ONGC and OIL on a nomination basis.
The Ministry of Petroleum has, therefore, sought the cabinet’s approval to alter the policy barring private entities from taking a state in nomination blocks.
As many as 44 of the ONGC and OIL fields have been identified for production enhancement work through Technical Services Model where technical tie-ups would get the ‘tariff’ that they bid as a return for increasing the output ‘over the baseline production’ for 10 years initially.
A baseline based on current oil and gas production from the 15 identified fields would be set and private companies taking 60 per cent equity stake would get only the incremental volumes.
Firms committing the maximum capital investment within 10 years of the contract award and the largest share out of its net revenue to the government would be awarded the fields.
The move towards privatization of some of the discovered fields has been prompted by falling or stagnant production at these fields. The government thinks that private producers would bring in new technology and inject fresh capital to raise the output and prolong the life of the fields. The move is part of the government’s goal to cut oil imports by 10% by 2022. At present India imports about 80% of its crude oil.
The government had tried the part-privatisation option to increase domestic oil output in 1992-93 when it faced soaring oil import bills due to severe foreign exchange crunch: it gave away 40% interest in 28 already-discovered oil and gas fields, including Panna/Mukta and Tapi, to a consortium of the defunct Enron Corporation of the US and Mukesh Ambani-led Reliance Industries. But the award aroused controversy following allegation of corruption against the then-minister of petroleum Satish Sharma, leading to a Central Bureau of Investigation (CBI) probe.
In 1999 Atal Bihari Vajpayee-led BJP government adopted NELP route to explore more areas onshore and offshore to increase hydrocarbon resources , as a result of which at least two major oil and gas fields have been discovered in Rajasthan onshore and Krishna-Godavari basin offshore. But still more than 3.14 million sq km of potentially hydrocarbon-bearing areas remain untapped. The Bay of Bengal is particularly considered potentially being the ‘Saudi Arabia of India’.
Along with intensifying exploration for new hydrocarbon blocks at home and acquiring oil and gas assets abroad the government is trying to enhance output in ageing fields by roping in private entities with proven technology, skill and capital on production-sharing contracts. ONGC is believed to have many matured fields with a current recovery rate of 25–33%. It is generally believed that average recovery from a typical oil field globally is around 40%. Enhanced oil recovery (EOR) and improved oil recovery (IOR) schemes assume special importance.
Meanwhile, the state-owned oil refiner Bharat Petroleum Corporation Ltd (BPCL) has urged the Petroleum ministry to integrate it with gas-transmission utility Gas Authority of India Ltd (GAIL) or upstream firm Oil India Ltd (OIL) as part of the government plan to consolidate the oil and gas sectors to create a behemoth of international scale to compete with international oil majors, like ExxonMobil and British Petroleum.
