Surprise Brent gift in new 'Marginal Fields' policy

Vol 14, PW 20 (07 Apr 11) People & Policy

Service contractors interested in developing ONGC’s marginal fields are in for a pleasant surprise.

PETROWATCH learns ONGC top management is considering important revisions to its much-derided policy on marginal field service contracts. ONGC’s present policy still includes archaic elements like an oil price of just $35/barrel and rules barring direct gas sales to customers.

If the updated draft policy is cleared by ONGC’s board, says a company source, service contractors could be paid 75% of the prevailing Brent crude benchmark for any oil produced from a marginal field. “This will end the long-standing complaint that the oil price we pay is out of touch with market realities,” says an ONGC source.

Under the present marginal fields policy, he adds, ONGC’s service contractors typically have two years to finish assessing a field. But in practice most contractors do not complete their Minimum Work Programmes in time and end up seeking extensions.

ONGC’s board is forced to consider each such application by a service contractor individually, in the absence of clear guidelines. All this should change under the new draft marginal fields policy.

ONGC will simply charge any service contractor a penalty of 10% of its performance bank guarantee for an extension of one year. And if the service contractor applies for a second yearlong extension then it will be charged a penalty of 20% of the bank guarantee.

“These penalties should stop contractors indiscriminately asking for extensions,” explains ONGC. Further, we are told, contractors covered by the new policy will be eligible to import any equipment and items needed for exploration without paying customs duty.

Gas pricing from ONGC’s marginal fields will also be brought in line with the government's pricing policy for gas.