DGH selloff push set to leave ONGC with dud fields

New Delhi: A proposal being considered by the oil ministryto privatise 11 prime fields of state-run ONGC will strip the company of its family silver and saddle India's flagship explorer with mature blocks nearing the end of their productive lives. It will also result in new prospects that will need huge investments to develop.

The proposal — inspired by case studies from Nigeria, Mexico, Iraq and Egypt — has demoralised ONGC's technical and scientific officers who have, through their association, appealed to the PM to stop the move. All serving and former executives TOI spoke to rejected these examples, saying discoveries in those countries were made by foreign companies.

In contrast, ONGC made the discoveries and started production from "just parcels of land" the government had given to it — when ONGC was a commission and not corporation — for exploration when no foreign explorer would look at India. Known as 'nomination fields', these account for 69% of India's crude and 75% of gas output.

"ONGC is among the few in the world to maintain and rejuvenate fields that are three decades old. It seems DGH (Directorate General of Hydrocarbons) is ignoring failures of private players to push privatisation of ONGC's fields. What is DGH prescribing for Reliance Industries' (RIL's) KG-D6 field where production stands at a tenth in less than a decade in spite of having BP as partner? Or Cairn India's Barmer block where output has dropped 4% in 2015-16?" a senior executive said on condition of anonymity.

All executives were receptive to the technical partnership proposal. "By DGH's own admission, technology, etc, can be inducted and the government's objective of raising production can be met without ceding ownership of fields. Why then this stress on privatisation?" another executive asked.

As reported by TOI on November 6, the ministry's technical arm DGH has suggested giving 60% stake with operational control in 15 fields — ONGC's 11 and Oil India's four — to private companies for 20 years, or the fields' remaining life, with a view to raising production through infusion of "world-class technology and oilfield management practices".

These fields have been identified on the basis of a cut-off formula broadly based on present production and future prospect. These include four of ONGC's biggest assets in Gujarat — Kalol, Ankleshwar, Gandhar and Santhal. Nineteen other fields have been identified for technical partnership with oilfield services companies without ceding ownership.

An agency report on Sunday quoted unnamed executives as suggesting the government should privatise the company instead of stripping its lucrative assets. Selling just 18% out of the government's 68.1% holding in the company would fetch over Rs 41,000 crore at current market price, many times more than the investment commitment from private companies the Centre may get from giving away 60% in the 11 fields of the company, the report quoted the executives as saying.

The DGH argues that the companies have failed to pump up volumes from these fields to desired levels and private companies should be given a chance. In 1992-93, about 28 of ONGC's discoveries were privatised practically using the same argument. But this time, the privatisation drive is coming when ONGC is poised for a big leap in oil and gas production with several new projects.