ONGC’s marginal fields to go under the hammer

To commercially exploit the oil and gas available in marginal fields owned by ONGC, the Centre is working on a proposal to auction these areas.

ONGC holds about 165 marginal fields (79 offshore and 86 onshore). The Petroleum and Natural Gas Ministry has already taken details from ONGC because to auction the fields, it will need to take them back from the public sector explorer.

Sources in the know said that ONGC has short-listed 60 such fields and given details on them to the Ministry.

Marginal fields were given to ONGC before the licensing rounds on nomination basis. A good amount of hydrocarbons is locked up in these fields, but they cannot be produced economically on a standalone basis, or with a conventional approach.

Besides, the public sector entity was not getting market price for the produce.

At present, of the 165 fields, with total ultimate reserves of 340 million tonne, owned by ONGC, operations are going on in 139 and work is yet to start on 26.

“The policy on marginal fields is expected to be out before the new regime (model revenue-sharing contract) for the New Exploration Licensing Policy (NELP) is in place,” a senior Petroleum Ministry official said.

ONGC has been maintaining that its attempt to develop marginal fields has been hit due to the subsidy sharing formula.

It has to sell crude at a discount to public sector oil marketing companies as part of the subsidy-sharing mechanism to offset losses incurred by the latter for selling oil products at a controlled price.

All crude oil produced by ONGC is sold to public sector oil refiners at a discount.

So, even when crude is at $60 a barrel, ONGC sells it at a Government decided discount.

“Marginal fields are scattered, so to develop them the regime has to be different. The company has been time and again asking the Government to treat marginal fields differently — if not differential pricing, tax incentives should be there,” another official said.

To exploit the full potential of these fields, ONGC has also tried outsourcing them to smaller companies, as service contracts. But, most contractors found it economically unviable as the Government had put a cap on the price of crude produced from these fields.

These fields are affected by several parameters such as environmental concerns, political stability, access, remoteness and, of course, the price and price stability of the produced gas/liquids. These make cost of production expensive.