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ONGC auction gets tepid response

In June, ONGC had sought private contractors for the 64 producing small fields, organised in 17 onshore contract areas and with a reserve of 300 million metric tonnes of oil equivalent, and is currently engaged in pre-bid talks. But some potential...

ET Bureau|
Nov 12, 2019, 08.36 AM IST
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Agencies
ONGC
While the auction process is underway, ONGC has stopped investing in these fields, which may lead to an output contraction .
Oil and Natural Gas Corp’s bid to seek private operators for its 64 producing small fields is attracting limited interest from experienced players as potential bidders want a key auction criterion changed: they want the state-run firm to offer a part of the baseline production on top of the proposed share in incremental output from these fields.

In June, ONGC had sought private contractors for these fields, organised in 17 onshore contract areas and with a reserve of 300 million metric tonnes of oil equivalent, and is currently engaged in pre-bid talks with potential bidders. The bidding will close in December.

“Most of the interest so far has come from inexperienced players. They have sought clarity on certain issues and are being answered,” an ONGC executive said. Essar Oil, oilfield services firm Baker Hughes and Sun Petro, and several less-experienced companies have sought clarifications on how the contract would work.

While the auction process is underway, ONGC has stopped investing in these fields, which may lead to an output contraction from these fields this year, executives said. New investment has been stopped since it is likely to help the private player eventually picked up to operate the field, they said.

Private operator is expected to bring in new technology and capital to raise output from these mature fields. It would bear all new cost and receive a share in the increased production after it takes over as operator but would get no part of the baseline production agreed to under the business-as-usual scenario. The bidder seeking the least share of revenue from the incremental production would be picked as winner.

But some potential bidders feel that just a share in incremental revenue may not make these fields lucrative enough for them and private operators should get a share in the baseline revenue as well.

Another contentious area is the baseline revenue and whose estimates should be relied upon for that. ONGC may need to seek Cabinet approval to change the terms of the contract. ONGC had faced a similar problem in the past to rope in private partners to enhance production from its two mature fields of Geleki in Assam and Kalol in Gujarat.
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