BP close to Mumbai High deal with ONGC
BP is close to an agreement with ONGC on a Technical Service Provider (TSP) contract to boost Mumbai High production.
Shell was also interested in the tender when ONGC invited offers on June 1 (2024), with both attending a pre-bid in Delhi on October 16 (2024). However, a source reports that Shell lost interest, leaving only BP ready to sign up for the 10-year assignment with an optional five-year extension.
He adds that ONGC and BP only had two points of disagreement, which are close to resolution. One was about the Goods and Services Tax (GST) on BP’s fees and earnings if chosen as the TSP; the other was about ONGC's baseline production numbers.
Under Indian tax law, GST on this contract would equate to 18%. "BP found GST was eating into its fees, and it wasn’t willing to accept that," says a source.
"After discussion, an understanding has been reached that ONGC will add the tax due from BP to the gross fee; the GST impact on BP’s earnings will be neutral." As for baseline production numbers, ONGC and BP plan to get third-party certification.
Typically, ONGC will give its baseline numbers based on the production profile and technical assumptions to the consultant, who will then do "history matching’ or a profile of past challenges in the field, among them high water cut. Because Mumbai High is a mature field, ONGC, at times, faces up to 90% water ingress but also 0%.
ONGC often carries out water injection to maintain production. "The (water) injector pattern is decided based on the reservoir," we hear.
"History matching can reveal the water ingress pattern." If BP wins the TSP contract, it will receive a share of net incremental production capped at 25% and fixed fees.
To qualify for the fixed fees, BP's incremental output for a quarter should be at least 80% above the baseline. BP must also deploy at least two qualified personnel for at least two years to work with Mumbai High teams.