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New schemes to sell ONGC’s marginal fields

To protect ONGC’s interests, Govt is suggesting that bids should be invited for the contractor’s share, reports Deepak Joshi.

business Updated: Oct 07, 2007 20:52 IST
Deepak Joshi

The government is planning a slew of fiscal incentives to encourage quick monetisation of Oil and Natural Gas Corporation’s (ONGC) marginal oil and gas fields.

The initiatives being considered include allowing the contractor international crude prices for the produce minus royalty and cess. To protect ONGC’s interests, it is being suggested that bids should be invited for the contractor’s share. The bidder will be asked to quote a percent share of oil and gas fields respectively. The bidder with the highest percent share to ONGC will be graded as H1 and other bidders graded as H2, H3 in descending order.

The Directorate-general of Hydrocarbons (DGH) has identified offering 18 marginal fields along with invitation for bids under the seventh round of the New Exploration Licensing Policy (NELP-VII), set for a launched next month. For gas fields, it has proposed a price of $4.2 per million British thermal unit (mBtu), minus royalty, as the price of gas to woo investors.

The government had last month set $4.2 per mBtu as the gas price formula for Reliance Industries’ gas from Krishna-Godavari basin. Apart from this, the government may allow the contractor the freedom to market or utilise gas.

Currently, gas can be used only by the contractor/affiliate for power generation and as compressed natural gas for households or automobiles. Moreover, there is a restriction production in excess of profile has to be shared by the bidder with the contractor.

In this context, the DGH has proposed a realistic evaluation of the reserves in the marginal fields and transparent evaluation criteria with simple contractual and fiscal terms. As per estimates, there are 165 marginal fields. Of this, 39 have been monetised in-house and 25 have been monetised on service contract. Out of the 25 fields awarded, Hirapur is under production, while other blocks are under an appraisal period or contract signing.