PMO seeks whitepaper on OVL, future strategy
New Delhi: After looking to sell oilfields of Oil and Natural Gas Corp (ONGC), the Prime Minister's Office (PMO) has sought a whitepaper on status and future strategy for the state-owned firm's overseas arm ONGC Videsh Ltd, sources with knowledge of the development said.
The government had on previous occasions looked at hiving off the highly successful OVL from its parent and monetising it by listing the firm on domestic or international bourses.
Sources said at the meeting called by Prime Minister Narendra Modi to review the oil and gas sector on October 12, the Oil Ministry was asked to prepare an in-house white paper on OVL looking into various issues, including reasons for its establishment, cost incurred and returns till date.
Also, the whitepaper was to look at future strategy of OVL so as to maximise returns and issues related to equity oil (the proportion of production that a concession owner has the legal right to retain).
OVL, which is 100 per cent owned by ONGC, has so far invested Rs 1.5 lakh crore (USD 28.36 billion) in 41 projects across 20 countries. It has under its portfolio reserves of 711 million tonnes of oil and oil equivalent natural gas.
Sources said at the October 12 meeting, which was also attended by Finance Minister Arun Jaitley and Oil Minister Dharmendra Pradhan, a six-member panel headed by NITI Aayog Vice Chairman Rajiv Kumar was set up to look at ways of enhancing output from the existing 66 oilfields that produce about 95 per cent of domestic crude, including by giving out stake to private and foreign companies.
The committee, which also comprises Cabinet Secretary P K Sinha, NITI Aayog CEO Amitabh Kant, Oil Secretary M M Kutty, Economic Affairs Secretary Subhash Chandra Garg and ONGC Chairman and Managing Director Shashi Shanker, would also look at models like outright sale for the remaining 149 oilfields that produce about 5 per cent of domestic crude oil, they said.
At the meeting, Kutty gave a presentation on the status of oil and gas exploration and production in India.
It was suggested at the meeting that the 149 smaller fields could be given out to private and foreign firms and ONGC could concentrate on the big ones where it could rope in technology partners through production enhancement contracts (PEC) or technical service arrangements.
This is the second attempt of by the Oil Ministry to take away some of the fields of state-owned ONGC for giving to private and foreign companies.
In October last year, the Directorate General of Hydrocarbons (DGH) had identified 15 producing fields with collective reserves of 791.2 million tonnes of crude oil and 333.46 billion cubic metres of gas of national oil companies for handing over to private firms in the hope they would improve upon the baseline estimate and extraction.
The plan, however, could not go through as ONGC strongly countered the DGH proposal with its own proposal that it be allowed to outsource operations on same terms as the government plan.
The government is giving pricing and marketing freedom to private operators while ONGC is forced to sell natural gas at rates that are well below cost. Sources said a few months back the Department of Investment and Public Asset Management (DIPAM) had written to ONGC management seeking listing of OVL to help unlock value by improving its corporate governance and efficiency.
ONGC had helped the government meet its disinvestment target last fiscal when it bought a 51.11 percent stake in state-owned Hindustan Petroleum Corp Ltd (HPCL) for Rs 36,915 crore.
After failing to find a buyer for Air India, DIPAM was looking at ONGC to meet the Rs 80,000 crore revenue mobilisation target set out for it in the Budget for 2018-19 from the sale of government stake in PSUs.
In the letter, DIPAM said PSUs with a positive network and no accumulated losses should be listed to unlock value. It, however, did not state how much stake in OVL should be sold for its listing.
Market regulator Sebi calls for a minimum 25 percent public float for a listed company.
Sources said proceeds of the listing of OVL would accrue to its parent ONGC but the government would seek a special dividend to reap that.
The government owns 67.45 per cent stake in ONGC. If ONGC were to declare entire proceeds of OVL listing as a special dividend, the government would get 67.45 per cent of the amount.
The government had in 2015 as well asked ONGC to list OVL. But the state-owned firm had at that time told the government that it was not the right time to list as oil prices were subdued and the company would not get the right value.
Oil prices have since rebounded and the government is looking to cash in on that. In 2017-18, OVL produced 9.35 million tonnes of crude oil, up from 8.43 million tonnes in the previous year. Together with natural gas, the output was 14.16 million tonnes of oil equivalent, up from 12.80 million tonnes in the previous year.
It reported a net profit of Rs 981 crore on a turnover of Rs 10,418 crore in 2017-18 fiscal. This compared with a net profit of Rs 701 crore on a turnover of Rs 10,080 crore in the previous fiscal. It had reported a net loss of Rs 3,633 crore in 2015-16 due to a sharp drop
in oil prices.