ONGC may take legal action if DGH goes ahead with stake sale proposal

Mumbai: State-run Oil and Natural Gas Corp. Ltd (ONGC) may take legal action if the Directorate General of Hydrocarbons’ (DGH) plan to sell 60% stake in the company’s hydrocarbon fields is taken forward, two company officials said.

Upstream regulator DGH plans to sell a 60% stake in 15 hydrocarbon blocks—11 of ONGC and four of Oil India Ltd—as part of a plan to increase output, a 6 November Times of India report said. Such a sale, if the proposal goes through, would mean that operational control will go to private firms.

“The DGH is not the government of India. It is a government organization. We are also a government-owned company. So when DGH is misguiding the government of India in the name of increasing production and farming out stakes in ONGC’s blocks, that will be challenged,” the first of the two ONGC officials mentioned above said on condition of anonymity as he is not allowed to speak to the media.

ONGC has maintained that DGH has not apprised it of the inclusion of 11 of its assets for stake sale. ONGC did not reply to an email sent on Monday.

According to the ONGC officials mentioned above, the fields DGH has shortlisted include some of its prolific blocks—Kalol, Ankleshwar, Gandhar, Santhal, Jhalora, Sagara, Vasna, Padra, Rudrasagar and Bhuvanagiri. Most of these are located in Gujarat.

In a letter to Prime Minister Narendra Modi on 23 November, the Association of Scientific and Technical Officers (ASTO) said the oil and gas fields in question have been discovered, developed and operated by ONGC for 30 years. The decision to sell a stake may have everlasting consequences on the health and future growth of ONGC, it said. “After 30 years of production, output from these fields will naturally show a dip from peak levels and, thus, cannot be termed under-performers,” ASTO’s president (central working committee), Sanjay Goel, wrote in the letter. Mint has a copy of the letter.

The government aims to cut oil imports by 10% by 2022 which could be achieved through enhanced hydrocarbon output by domestic companies both public and private.

The ASTO letter argues ONGC has lined up major capital investments for revitalization of its brown fields through redevelopment/enhanced oil recovery schemes.

The letter also cites the example of the Panna-Mukta field wherein production has declined by close to 60% over the past seven years.

Giving another example, Goel said that fields discovered and developed by ONGC were eventually returned to the company after 20 years as a contract given to a consortium led by Essar Oil Ltd way back in 1996 could not get finalized. “This clearly shows privatization alone is not a sufficient condition for augmenting output from any hydrocarbon property,” Goel said.

Questioning the privatization move, ONGC states the ASTO letter said that if stagnant or flagging production is a criterion for under performing fields, Reliance Industries Ltd’s (RIL’s) KG-D6 should be measured with the same yardstick.

“RIL-operated KG-D6 is under 10% of its targeted production. For a field that is less than 10 years into its life cycle, this is a staggering drop on any count,” said Goel.