India's flagship oil and gas producer ONGC on Wednesday said it is seeking foreign partners for yet-to-be-developed fields in lesser prospective areas but is shackled by uneconomic gas prices and tax structure.
Reacting to a PTI report on the Petroleum Ministry asking Oil and Natural Gas Corporation (ONGC) to sell stake in producing oil fields to private firms, get foreign partners in KG basin gas fields, monetize existing infrastructure and hive off drilling and other services into a separate company to raise production, the state-owned firm said the ongoing discussions with the administrative ministry were neither new nor intended to limit its role or growth.
"ONGC is also looking into strategic relationships and close alliances with key international players through (overseas arm) ONGC Videsh," the company said in a statement.
"Intention is to invite foreign participation to explore Category-II and Category-III basins which match size and scale of expectations and portfolio of these large players." Indian sedimentary basin is divided into three categories - Category-I includes producing basins such as Krishna Godavari, Mumbai Offshore, Assam and Rajasthan; Category-II basins are less prospective and contain contingent resources to be developed and produced (example Kutch, Mahanadi, Andaman-Nicobar, Saurashtra Vindhyan); Category-III are ones with only prospective resources to be explored and discovered (example Kerala-Konkan, Ganga Punja, Bengal-Purnea, Narmada, Himalayan Foreland etc).
PTI had on April 25 reported that Amar Nath, Additional Secretary (Exploration) in Ministry of Petroleum and Natural Gas, had on April 1 written to ONGC Chairman and Managing Director Subhash Kumar giving a seven-point action plan, 'ONGC Way Forward' that would help the firm raise oil and gas production by one-third by 2023-24.
It identified maturing fields such as Panna-Mukta and Ratna and R-Series in western offshore and onshore fields like Gandhar in Gujarat for sale of stake to private firms, as well as gas-rich block KG-DWN-98/2 and recently brought into production Ashokenagar block in West Bengal for foreign partner participation.
All the fields identified by the ministry letter are in Category-I basins and are producing. But ONGC wants foreign firms to share exploration risk.
ONGC in the statement said, "The ongoing discussions are neither new nor intended to limit role or growth of ONGC." "In fact during the ongoing discussions there has been an opportunity for ONGC to raise issues which are critical for ONGC to achieve the objectives of delivering value to all stakeholders," it said.
"Despite uneconomical gas prices, ONGC has been aggressively pursuing its deepwater projects in the east coast and a couple of shallow water projects in the west coast." ONGC also has a plan of acquiring much larger acreage through open acreage licensing policy (OALP).
"There are certain issues around structure where decisive steps can be evaluated only once the industry is completely under GST regime," it said.
Oil is out of the Goods and Services Tax (GST) regime and operators have to pay state VATs with no set-off, all services.
"Requirement and opportunity for ONGC is to play an even more pronounced role in improving energy security of the country. ONGC feels confident and comfortable that the ongoing discussions within ONGC and with its stakeholders will help deliver greater value to all stakeholders, and make ONGC a much stronger commercial organization, at par with the best in the world," the statement said.
ONGC said contrary to the impression conveyed by the ministry's communication of the firm's role being significantly affected, "the government has been continuously encouraging ONGC to play a much larger role in the context of India's oil and gas sector." The ONGC board approved Energy Strategy 2040 in April 2019 that outlines strategic growth initiatives across the energy value-chain.
"Besides, there have been regular interactions of ONGC with various stakeholders including the Ministry of Petroleum and Natural Gas (MoPNG), in order to further augment the role of ONGC in the domestic upstream sector," it said.
"The expectation and the strategy for ONGC is to act as the fulcrum around which an ecosystem for thriving oil and gas industry in the country can be created consistent with expectations for meeting Prime Minister's vision to reduce import dependence." ONGC said it has continuously been reviewing its engagements to move up higher in the value chain to concentrate on areas where the expected risk-reward payoff offers better business opportunities for growth.
"Over the years ONGC benefitted from participation of other players and opportunity specific alliances which have helped ONGC enhance value for itself, besides releasing ONGC resources to pursue more promising opportunities with perceived better risk return tradeoff.
"ONGC, in its efforts to augment production of oil and gas, is endeavoring to engage all interested players so that the concept of 'Atma Nirbhar Bharat' is the central theme of our domestic project execution," it said.
The Ministry has set the target of domestic production of 40 million tonnes of crude oil and 50 billion cubic meters of natural gas by 2023-24.
The bulk of the targeted domestic production for 2023-24 is expected to come from ONGC which is required to contribute 70 per cent of the domestic production -- 28 million tonnes of oil and 35 bcm of gas by 2023-24.
ONGC produced 20.2 million tonnes of crude oil in the fiscal year ending March 31 (2020-21), down from 20.6 million tonnes in the previous year and 21.1 million tonne sin 2018-19.
It produced 21.87 bcm of gas in 2020-21, down from 23.74 bcm in the previous year and 24.67 bcm in 2018-19.