Another marginal fields round from ONGC

Vol 14, PW 6 (09 Sep 10) Exploration & Production

ONGC has received oil ministry clearance to offer a new set of small oil and gasfields to interested contractors.

"The oil ministry has told us to go ahead and invite bids," confirms a senior ONGC source. "But first we must make changes to the fiscal terms and Bid Evaluation Criteria in the draft policy." In earlier rounds contractors complained bitterly over ONGC's fiscal terms, which capped the sale price of crude from the fields at $35/barrel, and made no provision for gas sales.

For this round, bids could now be invited early next year, possibly as early as January. In February 2008, ONGC and the DGH had prepared a draft policy listing 22 marginal fields for offer (see below).

Eight of the 22 fields are offshore and 14 are onshore, but the list is likely to be reworked. "Some fields could be removed," adds ONGC, "while other fields might be added." The final list could be ready by this November and presented to the ONGC board for approval.

Up to two months might then be needed to finalise the fiscal terms offered to contractors. ONGC appears ready to scrap the earlier $35/barrel cap, and introduce fiscal terms similar to those offered under NELP contracts.

Also likely is more clarity on gas pricing from marginal fields. In earlier rounds, contractors were permitted to sell crude only to ONGC, and could not freely sell marginal field gas.

But for this round, ONGC wants contractors to get a market determined price for crude oil, adding they should be allowed to sell it to the "nearest' government nominee". Contractors are also likely to be offered the right to sell gas.

When ONGC proposed its draft marginal field policy in February 2008, it wanted reduced royalty rates and reduced 'cess (tax)' on production to attract contractors. But the finance ministry rejected this outright.