ONGC has decided to invite bids to monetise 20 ‘marginal’ fields in Krishna-Godavari, Jaisalmer

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and western onshore basins. These fields have estimated reserves of nearly 15 million tonnes of oil and gas.

“To attract companies, crude prices will be linked to international prices,” said an official privy to the development, who did not wish to be named. “And natural gas will be as per the government-approved price.”

In 2010-11, ONGC reported ultimate reserve accretion of 83.56 million tonnes of oil and oil equivalent in domestic operated fields, taking its total in place reserves to 1,688 million tonnes. On a standalone basis, ONGC produced 24 million tonnes of oil and 23.09 billion cubic metres of gas in 2010-11. At this rate, ONGC’s oil production worked out to 0.48 million barrels a day. India consumes 3.24 million barrels of crude a day.

Between 2004 and 2007, ONGC had awarded 25 fields on service contracts for monetisation. However, there was poor response to these fields as oil price was not linked to international prices. For instance, in the case of Hirapur field, oil is priced at $26 a barrel. The contractor (Prize Petroleum) has 32.5 per cent stake that translates into realisation of $8.45 a barrel, whereas the cost of production is pegged at $14 a barrel. Out of these 25 fields, one is in production; 10 are at different stages of execution and the remaining 14 fields have been terminated.

ONGC has now decided that crude oil produced from these small fields would be priced at 75 per cent of international oil price, maximum up to $100 a barrel. Also, there will be addition of further 10 per cent of any increase of international price difference between $100-150 a barrel, if global prices touch these levels.

For these fields, ONGC and the contractor will share sales tax and other statutory levies such as royalty, OID cess, national calamity and contingent duty (NCCD), education cess and VAT on produced hydrocarbons proportionately. ONGC will have at least 40 per cent stake in the fields producing

crude oil.

For fields producing natural gas, royalty and any other tax on production would be borne by ONGC. VAT and sales tax would be recovered from customers in addition to the prices. The state-run explorer will have at least 30 per cent stake. The contractor would do marketing of the produced gas as per government allocations.

“These conditions have been discussed with the nodal oil ministry and it has given its go-ahead. Pricing of crude oil minimises the risk factor to ONGC because it includes sharing of statutory levies,” the official said.

At no stage of development or production from these fields, there would be negative realisation for ONGC. If it happens, the contract will be re-negotiated. This step is taken in the light of the oil subsidy bill borne by ONGC to compensate state-run oil marketing companies every year.

Bringing new fields on stream is a big challenge for ONGC as it is fighting declining output from most of its fields that are several decades old. ONGC produced 5.933 million tonnes of crude and 5.605 billion cubic metres of natural gas in the first quarter of 2011-12, excluding its joint venture fields.

India consumes nearly 175 million tonnes of crude oil in a complete year, out of which 135 million tonnes are imported. India has total installed refining capacity of 193.398 million tonnes per annum. ONGC accounts for 73.6 per cent of total crude oil production 48.6 per cent of total natural gas output of India.