Vol 3, PW 7 (28 Apr 99) Exploration & Production

It is becoming increasingly clear that ONGC is keen to get a foot-hold in the Caspian Sea.

A senior team of ONGC officials - TK Gopalaswamy, Director Exploration, IN Chatterjee, Director Finance, Atul Chandra, Managing Director, ONGC Videsh, and ONGC negotiators - was in Moscow last week for talks with Lukoil. On the table was a proposal for ONGC to Farm in to a Lukoil concession in the north Caspian Sea.

A source on the team tells Petrowatch negotiations focused on two principal issues: the size of the equity stake for ONGC, and the size of any discovery bonus paid by ONGC to Lukoil. Also discussed were details of a Production Sharing Contract (PSC) and pricing of the potential crude discovered.

One key issue (raised by ONGC) was how much of the oil - if any is found - could be exported to India. Indian government guidelines are clear: ONGC is allowed to explore abroad only to compensate diminishing reserves at home.

The source stresses both Lukoil and ONGC are confident of the prospectivity of the North Caspian concession as oil producing fields currently sit on either side of the prospect. A second round of high-level discussions is expected in May.

In Petrowatch - 6/Jan/99, we reported on an exploration MOU between Lukoil and ONGC, signed between Bikash Bora, Chairman, ONGC, and his counterpart at Lukoil, Vogit Alekperov, during a visit to India by Russian Prime Minister, Yevgeny Primakov. At the time Lukoil was reported to have offered ONGC 8% of its equity and a 40% farm-in to the north Caspian prospect.

Lukoil is reportedly asking for $51m in past costs.