ONGC open to tie-ups for prospecting new basins, flags ‘critical’ issues on recast


NEW DELHI: Days after the oil ministry sought a response to a plan to carve up ONGC’s functional sections into a separate company and sell stake in major producing fields, India’s largest state-run explorer has said it is eyeing foreign partnerships for prospecting in unexplored basins but critical issues needed to be addressed before looking at changing the company’s structure.
“The government has been continuously encouraging ONGC to play a much larger role in the context of India’s oil and gas sector,” contrary to the impression conveyed by the ministry’s communication, the company said in a statement on Wednesday.
Additional secretary (exploration) Amar Nath had on April 1 sent an ‘action plan’ to the company on April 1, a day after chairman Shashi Shanker superannuated, giving officiating chairman and director (finance) Subhash Kumar to respond in four days. The plan also envisaged privatising smaller fields and monetising other assets.
The company said the discussions have given ONGC an opportunity to raise issues that are critical for “delivering value to all stakeholders.” “There are certain issues around (the company’s structure) where decisive steps (on a recast) can be evaluated only once the industry is completely under GST regime,” it said and also flagged below-cost gas price ceiling among the issues.
The statement indicates ONGC may have been able to convince the ministry against offering stake in major producing fields since they did not share the financial risk of exploration. The company said it is eyeing strategic partnerships for Category-II (less prospective basins such as Kutch, Mahanadi, Andaman-Nicobar and Saurashtra) and Category-III (prospective but resources have to be explored and discovered such as Kerala-Konkan, Ganga Punja, Bengal-Purnea, Narmada, Himalayan Foreland).
The GST issue pertains to separating in-house technical and field services into a separate entity. Under this arrangement, ONGC will have to pay 18% GST to the subsidiary but will not be able to claim input credit. This will raise costs for ONGC.
Defending its turf, ONGC said it has been “aggressively pursuing deepwater and shallow water projects in the east and west costs, respectively, in spite of uneconomical pricing. It also pointed out floating of a separate arm for maximising value from the gas business.