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JAN 17 2015

Narendra Modi government identifying small oil fields for auction

  • Economic Times, ET Bureau / Hyderabad
  • Created: Sat 17th JAN 2015

The government is identifying the small and marginal oil and gas fields it plans to auction in coming months to boost domestic production, Oil Minister Dharmendra Pradhan said today.

State explorers ONGC and Oil India will surrender those small and marginal fields that they are unable to produce from due to economic size or operational issues. These fields will be demarcated into areas for auction.

"We are identifying marginal fields for auctioning in a transparent process," he said at 13th Petro India Conference, organised by India Energy Forum and ORF, here.

As many as 63 discovered oil and gas are being surrendered by state-owned Oil and Natural Gas Corp (ONGC) as they were found to be uneconomic for a large firm with huge overheads to develop or bring to production. Smaller firms with a fraction of operating cost can develop them at much faster and economic rate.

Oil India Ltd (OIL) will surrender 6 marginal fields. Pradhan said the fields that ONGC and OIL are surrendering are the ones where they have not been able to start production.

"It is not as if we are asking them to do so (surrender). They themselves are giving up these fields which they had in first place got on nomination basis much before the advent of New Exploration Licensing Policy (in 1999)," he said.

The auction would be on a new revenue sharing model. Under the revenue sharing model, bidders will have to upfront state how much oil and gas they will share with the government. The firm offering maximum win the right to explore and produce from the field.

This is a shift from the much-criticised Production Sharing Contract (PSC) regime where blocks were allocated to firms that bid highest amount of work in the area.

It allowed the firms to recover all their cost before sharing profits with the government, a regime which was criticised by CAG as one that provides incentive to operators to keep raising cost so as to postpone government share.

"It's a win-win for all... the companies and the government benefit and production increases," he said.

ONGC holds about 165 marginal fields (79 offshore and 86 onshore). 63 of these are being surrendered for auction.

Marginal fields were given to ONGC before the licensing rounds on nomination basis. Hydrocarbons resources are locked up in these fields, but they cannot be produced economically on a standalone basis, or with a conventional approach.

Of the 165 fields, with total ultimate reserves of 340 million tons, operations are going on in 139 and work is yet to start on 26.

Tags

TOTAL Comptroller and Auditor General Gas Natural Gas New Exploration Licensing Policy Oil ONGC Oil India Ltd Energy New Exploration Licensing Policy Oil and Gas Hydrocarbons India

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