After four years of struggling to rope in strategic partners for its loss-making coal bed methane assets, ONGC may approach the board again on August 30 to repeat the search.
The company board’s previous decision to farm-out the participatory interests was blocked by the Union Ministry of Petroleum and Natural Gas.
The blocks, located in West Bengal and Jharkhand, were acquired more than a decade ago and have so far cost the oil and gas major close to Rs 600 crore on exploration and development projects.
In return, ONGC produces only 10,000-15,000 standard cubic metre of gas from one well in Jharia that brought home a net revenue of as little as Rs 3 crore, in a decade or more.
Failed attempts
ONGC had first proposed to rope in a joint venture partner in end-2008. But the company faced one bureaucratic hurdle after another till May last, when the company board granted ‘in-principle’ approval to the farm-out offer.
It was decided that a total of 35 per cent stake in each of the blocks — North Karanpura, Bokaro, Jharia and Ranigunj — will be farmed-out to two interested bidders each.
Three parties were short-listed from an identified pool of global and local CBM players who were keen to follow ONGC’s terms. Upfront payments to help ONGC recover past costs, was one of the biding criteria.
Dart Energy being the top bidder was granted majority stake (out of a total of 35 per cent to be farmed out) in all four blocks. The other two companies — a consortium of Jindal Petroleum and Deep Industries and Great Eastern Energy Corporation (GEECL) — were offered minority interests in select blocks.
Global tender necessary?
However, in August, based on a complaint by GEECL — a successful bidder — the Ministry advised ONGC to repeat the search through a ‘global tender’. This was primarily on the grounds that the company followed a ‘limited tendering procedure’.
Interestingly, according to submissions of ONGC Director Exploration, S.V. Rao, to the board, the critical choice of a strategic partner may not be done through global tender. This is distinctly different from selecting a contractor.
In the past, the company had farmed-out participatory interests to overseas oil and gas companies through negotiations only.
The logic apparently convinced the ONGC board (that includes Ministry nominee) to approve the deal in May.