In what may serve as a big blow to the country’s deepwater exploration programme, foreign oil majors are one-by-one pulling out of the prolific oil and gas exploration blocks of state-owned ONGC in the Krishna-Godavari (KG) basin.
UK-based BG Group is up next after Norwegian oil major Statoil and Brazil’s Petrobras to walk out of another east coast block of ONGC. All blocks are nex to the productive KG-D6 block of Reliance Industries Ltd.
“BG (holding a 30 per cent stake in KG-DWN-98/4) would like to inform you that it is no longer participating in the block,” the former British Gas told ONGC in a recent letter.
BG said the output-sharing contract for the block ended in May 2008 with no extension agreed on.
The KG basin had attracted investor fancy after RIL’s success in 2002, but the overseas partners have cited procedural delays or lack of clarity on major policy issues as irritants in their way.
ONGC needs the partners as it does not have the technology to produce gas in the geologically challenging KG basin.
ONGC’s chairman R S Sharma shot off an angry letter to the petroleum secretary recently, saying red tape was making international oil majors apprehensive over sharing exploration risks.
Sharma said Petrobras quit the block also because of uncertainties about gas pricing and a tax holiday.
ONGC in 2007 had given a 15 per cent interest to Petrobras and 10 per cent to Norsk Hydro (now Statoil Hydro) in its KG-DWN-98/2 east coast deepwater block.