KOLKATA (miningweekly.com) – In a bid to circumvent government plans to take away its discovered small fields (DSFs), national oil and natural gas exploration and production (E&P) major ONGC has decided to auction such assets under production enhancement contracts (PECs), while retaining ownership with itself.
Company sources said that a consultant has been appointed to identify the DSFs that will be auctioned and production outsourced. It is possible that as many as 60 oil and gas fields could be put on the block for bidding by private domestic or global E&P companies.
However, ONGC will give preference to global majors with experience in incorporating the latest production-enhancing technologies, since a successful bidder will need to enter into PECs, which will make it mandatory for the bidder to introduce comprehensive technologies to improve production. The winning bid will be decided on the basis of the highest production or revenue over and above a production base line.
Currently, only 5% of ONGC’s total oil and natural gas production is accounted from DSFs, while 90% of aggregate production is from 60 large oil and gas fields.
Earlier this year, a Group of Ministers identified 97 DSFs to be taken away from ONGC and Oil India Limited and auctioned to private investors on the grounds that the State-run oil companies had failed to develop these assets.
The plans came in for severe criticism, over “asset stripping”, by a section within government-owned E&P companies, which argued that, while private investors would secured these assets through competitive bidding and would enjoy the benefits of full marketing and pricing freedom, which was denied in the case of assets currently in the fold of national companies, handing over the entire ownership of DSFs to private investors would deprive national E&P companies of any compensation for investments already made in exploration and operationalisation of these assets even though total production from such fields was comparatively small.