ONGC tells Prize to ask Nishi Vasudeva for help

Vol 17, PW 18 (24 Apr 14) Exploration & Production

ONGC is telling HPCL’s upstream subsidiary Prize Petroleum to go directly to the oil ministry with its request for a higher oil price at the Hirapur marginal field in Gujarat.

Hindustan Petroleum subsidiary Prize makes a loss on the 130 b/d it produces under a service contract with ONGC, which owns the field. Prize gets 32.5% of an oil price capped at $26/bl which works out to $8.5/bl.

After transportation and processing fees Prize is left with $6/bl. Desperate Prize managers visited ONGC's Mumbai office on April 4 asking for at least $44/bl - the price ONGC gets for its oil.

Prize also wants ONGC to waive transport and processing fees of around $2.5/bl. ONGC sympathises with Prize's situation but says it can’t do anything and told the Prize managers to ask HPCL chairwoman Nishi Vasudeva to intervene directly with oil secretary Saurabh Chandra.

Earlier attempts by ONGC to raise its marginal field oil price for service contractors have come to nothing. “We have been trying for three years to help Prize," says ONGC.

"But our board is concerned about a legal challenge if we raise the price cap.” ONGC has held three marginal field bidding rounds since 2004, awarding service contracts for 25 of its 165 assets.

Last June it began negotiations with the oil ministry to offer tax and subsidy breaks to kick-start a fourth round offering 26 fields. Talks continue.