BHP consortium refused to improve NELP-VII bids

Vol 12, PW 12 (30 Oct 08) People & Policy

Sharp differences between the oil ministry and a consortium of Australia’s BHP Billiton and India-based GVK Oil & Gas over the minimum work programme threatened to leave six of the 19 deepwater blocks offered in NELP-VII without any bids.

Oil and gas newcomer GVK and partner BHP are sole bidders in six offshore deepwater Mumbai blocks while ONGC and GSPC is a competitor in the seventh deepwater block, located offshore Kerala-Konkan. Even for this Kerala-Konkan block, we are told, BHP and GVK will emerge the winner because their bid is better than that of ONGC and GSPC.

An industry source tells PETROWATCH that during evaluation of the bids, BHP and GVK representatives were called by the DGH and asked to better their minimum work programme. On paper, BHP with 26% is operator in this consortium, as GVK, with 74%, has no previous oil industry experience.

“All the money is being put in by GVK,â€‌ stresses a source. “BHP has just lent its name and expertise.

â€‌ DGH and oil ministry officials, we hear, were not satisfied with BHP and GVK offering to shoot only seismic, with no promise to drill wells in the Phase-I work commitment. “They (BHP-GVK) firmly declined to add to the work programme,â€‌ adds a source.

“The ministry decided against pressing them further because they would have just walked out leaving these six blocks without any bids.â€‌ Says another source: “BHP and GVK must be regretting their decision to bid for these blocks; nobody else has bid; these blocks are not at all prospective.

â€‌ The six Mumbai offshore blocks lie in water depths of more than 2000 metres, making exploration expensive and future development costs, if discoveries are made, almost prohibitive. Contacted by PETROWATCH, the DGH confirms that BHP and GVK were asked to submit a better work programme.

“Preliminary discussions were held with them during the evaluation and they (GVK) said this (existing work programme) was enough given that this is the first time they are entering exploration.â€‌