Govt mulls ONGC fields' stake sale to private cos

The Oil Ministry plans to approach the Cabinet soon for allowing private firms to take participating interest (PI) in a nomination block, sources privy to the development said.

The policy currently allows giving out of PI or a stake to a private company only in the blocks or areas awarded in open auctions under New Exploration Licensing Policy (NELP) since 1999. However only exploration acreage was auctioned under global bidding in such rounds.

All areas prior to that were given to Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) on a nomination basis.

ONGC produces 87 per cent of its 25.53 million tonnes of oil from fields given to it on nomination basis. As much as 95 per cent of 23.28 billion cubic meters of annual gas production comes from nomination blocks.

The nomination fields include Mumbai High, India's biggest oil field, and Bassein gas field, the nation's biggest natural gas producer.

Sources said the ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital.

It has been tasked by Prime Minister Narendra Modi to cut oil import dependence by 10 per cent by 2022 over 77 per cent dependence in 2014-15. The dependence has only increased and is now over 80 per cent. Sources said initially ONGC got service companies involved in raising output by offering them incentive if production was raised by pre-set milestones over and above the current levels.

However, the services companies are not willing to take sub-surface risk which only oil and gas exploration and production companies can take, prompting the ministry to moot this idea of privatisation by giving 50-60 per cent stake in nomination blocks.

The privatisation is repeat of the infamous round in 1992-93 when medium sized discovered fields like Panna/Mukta and Tapti oil and gas field in the western offshore was given to now defunct Enron Corp of US and Reliance Industries.

As many as 28 fields were then awarded. Under this regime, ONGC was made licensee and given an option to farm-in 40 per cent of stake.

The controversial privatisation under the then oil minister Satish Sharma had resulted in a CBI inquiry.

Sources said the Directorate General of Hydrocarbon (DGH) has backed the move of getting private and foreign firms in producing oil and gas fields of ONGC and OIL.

New Delhi: The Union Cabinet on Wednesday gave its ex-post facto approval for an initial pact signed between India and Belarus in the oil and gas sector.

The memorandum of understanding (MoU) was signed on September 12, 2017 during the visit of president of Belarus to India, an official statement said.

The move is aimed at promoting bilateral relationship between India and Belarus and it is envisaged to enhance the economic and commercial cooperation between the two sides in oil and natural gas sector.

Under the pact, both sides will work towards establishing cooperation in the areas of upstream and downstream activities, capacity building, technology transfer, enhanced oil recovery and development of mature fields in India, the statement said.

ONGC may sell stakes in IOC, GAIL to fund HPCL buyout

New Delhi: State-run ONGC on Wednesday said it may sell its holding in Indian Oil Corporation (IOC) and GAIL to fund the Rs 33,000 crore acquisition of HPCL.

The company is debt free and has got shareholders' approval to raise Rs 25,000 crore through borrowing, ONGC Chairman and Managing Director Dinesh K Sarraf told reporters here.

"We have several options to fund the acquisition. On standalone basis we are debt free so we can borrow from the market. Also we have certain investments which can be sold," Sarraf said.

ONGC has about 13.77 per cent stake in IOC, which is worth around Rs 26,450 crore and 4.87 per cent stake in GAIL, which is worth Rs 1,640 crore.

Sarraf said no decision on selling stake has been taken but the option is available for the company.

"We don't know the exact timing when the deal will be closed but we certainly hope it will happen in calender year 2017," he said.

He further said the company is buying HPCL as it is looking to hedge its upstream oil and gas production risks with presence in downstream oil refining and marketing business.

During high oil prices, upstream companies make profit and downstream companies make losses and vice versa is also true.

He said ONGC currently has Rs 10,000 crore of cash.

Sarraf, whose tenure is scheduled to end on October 1 further said HPCL will remain a separate listed company even after the acquisition and will function as a subsidiary.

"ONGC board will support the merger of HPCL with its subsidiary MRPL if a proposal so comes," he added.

Yesterday, Shashi Shanker was appointed as Chairman and Managing Director of ONGC, till March 2021.

The Appointments Committee of the Cabinet (ACC) named Shanker, who is currently Director (Technical and Field Services) at ONGC, as CMD till his superannuation, as against an initial one-year term proposed by the Oil Ministry.

ONGC's crude oil production was 22.56 million tons in 2012-13, which dipped to 22.25 million tons in the following year before rising marginally to 22.26 million tons in 2014-15 and 22.36 million tons in 2015-16. It dipped again to 22.25 million tons in 2016-17.