India's ONGC in talks with energy giants for gas block tie up

Indian state-owned Oil and Natural Gas Corporation is in talks with energy majors BP Plc, Exxon Mobil, BG Group, Eni and BHP Billiton (ASX:BHP) for a strategic tie-up for its Krishna Godavari basin gas block.

"We are looking at exploration firms with expertise to produce from deep-sea. We have opened our KG basin block data to global companies and have sought firm offer by May 31," ONGC Director (Exploration) Dinesh Pande said here.

ONGC is looking for a partner after Norway's Statoil and Petrobras of Brazil decided to quit the block KG-DWN-98/2 due to government delays in approving their participation in the deep-sea acreage.\

The block now has 10 gas discoveries and ONGC plans to tie-up these with six gas finds in neighbouring 1G block to begin production in next 3-4 years.

Pande said KG-DWN-98/2 was awarded under the New Exploration Licensing Policy and the policy allows it to farm out a participating interest (equity stake) to foreign firms.

But since Block 1G was given to it on nomination basis, it cannot sell stake to any firm. ONGC can at best involve a foreign firm as a service contractor.

"The companies have to decide if they are comfortable with taking stake in one block and being a service contractor in the other," he said.

BP, Exxon, BG and Eni have already seen the data of the prospects ONGC has discovered in the KG-DWN-98/2, that sits next to Reliance Industries' prolific KG-DWN-98/3 or KG-D6 block, and 1G block in Bay of Bengal. BHP has also shown interest but it has not seen the data as yet.

ONGC has 65 per cent interest in KG-DWN-98/2 that has been assessed to hold 14 trillion cubic feet of gas reserves. It has 100 per cent stake in 1G.

The company plans to tie up discoveries in the two blocks to produce 25-30 million standard cubic meters a day by 2015.

Petroleo Brasileiro SA or Petrobras, Brazil's state-controlled oil firm, has offered ONGC its 15 per cent interest in KG-DWN-98/2 without any cost. Similarly, Statoil has decided against participating in future drilling in the acreage off the Andhra coast.

This follows apparent unwillingness of the Oil Ministry and its technical wing DGH to accord approvals for equity participation by foreign companies and the inordinate delays in clearing the drilling programmes.