ONGC to unveil radical new â€کmarginal fields' policy

Vol 13, PW 2 (02 Jul 09) People & Policy

ONGC will soon announce a radical new policy to attract more private investors to develop its capped marginal fields.

This new policy is based on lessons learnt from the lukewarm response to three earlier rounds. An ONGC source tells PETROWATCH the policy has been cleared by the DGH and is under review with the oil and finance ministries before final approval.

“In the new policy we have remedied the deficiencies of earlier rounds,â€‌ says a source. Crucially, ONGC now accepts long-standing investor demands that the crude price should be market-driven, not fixed between the $18/barrel floor and $35/barrel ceiling set for the previous rounds.

These price limits will be abolished in the new policy and the crude oil price will henceforth be linked to a monthly international average. Another significant change will allow negotiated gas prices between ONGC and the service contractor using the existing market price as a benchmark or through mutual agreement.

The new policy will also allow the contractor to sell gas in the open market, irrespective of who the end user is. In the previous policy, the gas price was set at $4.75/mmbtu and the gas could be used only as CNG or to produce electricity.

Under the new policy the marginal fields’ service contract will be brought in line with NELP contracts. But there will be no change in the ownership pattern of the oil or gas produced and they will continue to remain the property of ONGC just as under NELP the government of India is the owner of all oil and gas produced.

Earlier there was no provision for granting extensions to work programmes; the new policy will allow time extensions – but with penalties. “If there has been reasonable progress then a six-month extension will be given without penalties,â€‌ adds our source.

Extensions beyond six months will be allowed with penalties in line with a formula to be determined by the oil ministry.