PEL for ONGC blocks will all expire next year

Vol 10, PW 5 (29 Jun 06) Exploration & Production

Bureaucrats are scathing at the manner in which ONGC went about securing a strategic partner for its five deepwater blocks, particularly since the Petroleum Exploration Licences have already expired or are about to expire.

The PEL for KG-OS-DW has already expired, we hear. What do they mean by sending in a farm-out agreement for a block which does not have a valid PEL As for the other two blocks, we understand the PELs will expire next year.

Under these circumstances, we are told, ONGCs request cannot be considered. We are told that theres no question of extending the term of the PELs because in 1999 when NELP was first announced the government decided that no more blocks would be offered to national oil companies (ONGC and Oil India) without competitive bidding.

Only cabinet, we hear, can reverse such a critical policy decision. It has taken ONGC five years to find a partner, says a source.

And now when the PELs are expiring or have expired they come up and say we have found a strategic partner. At this rate it will take them another five years to submit a work programme.

This is a clever way of hanging on to blocks. We wont allow it.

All exploration work, says the ministry, should have been completed during the term of the PEL. Given the speed at which theyve been working, we dont see how they can complete the exploration work even for the two blocks where the PELs will expire in 2007-08.

Giving in to ONGC on this issue, says the ministry, will set a precedent for other operators. Another issue with the ministry is that these three blocks attracted only a single bidder: British Gas.

The KG basin is attracting interest and competitive bids from so many companies after the Reliance and GSPC discoveries that this (single bid) is not acceptable. It just does not reflect the reality that the Krishna Godavari basin is now seen to be prospective.

Another ONGC mistake was to forget to submit a work programme with the farm-out approval request to the ministry.