BP commits $128.6m to ONGC for TSP contract
More details are trickling in about ONGC's early January (2025) decision to hire BP as a Technical Service Provider (TSP) at the declining Mumbai High field.
On January 6 (2025), ONGC's board approved the proposal to hire BP for 10 years following its 'techno-contractual' offer submitted on December 24 (2024) and the price offer opened on December 31 (2024). ONGC group general manager (materials management) Manu Kashyap issued a six-page LoA on January 7 (2025) to Neha Jain, senior regional corporates and partnerships manager at BP Exploration (Alpha).
On the same day, ONGC alerted the BSE and NSE about the TSP with BP. A source tells us BP was to confirm to ONGC by January 10 (2025) that it is submitting either a performance bank guarantee (PBG) or a corporate guarantee (CG) within 30 days of the LoA.
Either should be an irrevocable, unconditional document favouring ONGC for $128.58m, valid for the entire 10-year contract or up to March 8 (2035). This amount is equivalent to 10% of the annualised contract value of BP's committed incremental production based on a crude oil price of $53.3/barrel and a natural gas price of $5.73/mmbtu, converted at Rs82.33/$1.
If BP submits a PBG, ONGC wants it either for the full 10-year contract or initially valid until January 7 (2027). And it should be renewed within two months of expiry of the existing PBG.
Expect a formal contract between BP and ONGC within 45 days of the LoA once ONGC is satisfied with the PBG/CG. BP must nominate its representative to the project within seven days of the LoA; both BP and ONGC have to nominate their members to the joint management committee (JMC) within 15 days of the LoA; and both sides have to agree on the "methodology of petroleum production."
BP must also sign the contract and submit a mobilisation plan to the JMC within 45 days, and mobilisation must be completed within 60 days of the LoA. Our source adds BP has committed incremental Mumbai High hydrocarbons production above the yet-to-be-agreed baseline numbers from the 13th month.
Incremental oil production in the 13th month will be 130,000 barrels, and incremental gas production will be 18,303 cubic metres, rising to 160,000 barrels of oil and 21,503 cubic metres of gas in the 14th month. BP believes incremental oil production in the 24th month will be 410,403 barrels and incremental gas production 47,303 cubic metres.
Mumbai High began producing in 1976 and peaked at over 400,000 b/d in 1989 before sharply plunging to 134,000 b/d by March 2024.