With KG nod after 2 years, ONGC seeks new allies PDF Print E-mail
Friday, 06 July 2012 00:39
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Over two years after it first applied for permission to drill six more exploration wells in the KG basin KGDWN-98/2 block that it bought 90% of from Cairn India, the public sector ONGC finally got permission last fortnight. By which time, with its foreign partners fed up and leaving it, ONGC is now back to looking for new partners. One possible partner with whom discussions are being held, and the data on the block being shared with, is ConocoPhillips.

ONGC had sold 15% equity each to Brazil’s Petrobras and Norway’s Statoil, known for their deepwater expertise, but both sold the equity back to ONGC after a long wait.

ONGC had bought the deepwater block in 2003 and done some exploratory drilling, but with its exploration period coming to a close, it wanted to explore some more to test whether what it thought was one continuous gas block was actually so — in Reliance’s KG Basin block, the reason why gas production has fallen sharply is that what Reliance thought was a big gas field turned out to be pockets of gas that were not connected with one another.

As FE reported on June 26, exploration has fallen dramatically over the past few years. While the petroleum ministry clarified that it was unfair to point to no wells being drilled in New Exploration Licensing Policy (NELP) rounds VII-IX as firms get seven years for exploration, there is little doubt participation levels have been falling steadily (see ‘The gas in our exploration policy’ on the edit page for some of the reasons) — just 13 blocks were awarded in NELP IX compared to the 34 on offer in sharp contrast to the 70 blocks offered and 31 awarded in NELP VIII, and 57 offered and 44 awarded in NELP VII (see graphic). Within this, the share being bagged by the private sector has fallen, from around 70% in NELP V to 45% in NELP IX.

While ONGC had estimated its exploration expenditure in the KG Basin block would have been around $1 billion — leading to an eventual development expenditure of $5 billion if the block turned out as it expected — Cairn had to abandon its planned $150 million or so of exploration investment in four blocks when it found it could not get clearances from the navy, the army and even the department of space. One exploration block it had won was in the navy’s exercise zone and another was in the way of the army’s firing range.

Yet another was put on hold as it fell under the path of the rocket launches by the department of space. Cairn was finally forced to declare force majeure on these blocks.

A presentation made by the petroleum ministry to the principal secretary to the prime minister on Monday has more such frightening details. It says that of the 249 blocks awarded under NELP, 73 are facing problems of the type Cairn encountered. The ministry took 73 of these up with the defence and 28 were cleared – these do not include the Cairn blocks. Seven of these need clearance from the DRDO, 17 from the Navy, 7 from the Indian Air Force (see graphic). It is for this reason that the prime minister's office has been pursuing the idea of ministries/departments getting basic clearances like this before they award projects – in the roads sector, projects are routinely held up for a year or more with clearances not easy to get for removing trees or electric utilities along the way.


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