ONGC's Raha: ONGC will go it alone in deepwater exploration program

India's Oil & Natural Gas Corp. (ONGC) has decided to go it alone in its deepwater exploration program, based on the lack of responses received in its most recent tender offer.

Sep 27th, 2002

By an OGJ correspondent

MUMBAI, Sept. 27 -- India's Oil & Natural Gas Corp. (ONGC) has decided to go it alone in its deepwater exploration program, based on the lack of responses received in its most recent tender offer. Also, the state oil and gas company's chairman and managing director, Subir Raha, recently updated the company's continuing operations in India and internationally.

"We had called for tenders from global oil companies to help develop 5 deepwater blocks, but the response was far from encouraging," Raha said in Mumbai. "We have also decided to call for tenders to develop 93 offshore marginal fields along India's western coast. We have estimated that, between them, these fields hold 200 million tonnes of oil and 120 billion cu m of gas reserves," he noted.

ONGC in India
Within India, Raha said, the company is restructuring its upstream activities. ONGC will spend 121 billion rupees to implement enhanced oil recovery schemes in 15 fields, including Mumbai High. "We have achieved a reserves accretion of 191 million tonnes of oil and oil-equivalent gas during the financial year 2001-02 as a result of the ongoing restructuring," Raha said.

ONGC's downstream plans involve buying a part of Hindustan Petroleum Corp. Ltd.'s (HPCL) 37.5% stake in the Aditya Birla Group-owned Mangalore Refinery & Petrochemicals Ltd. "This is being done for a consideration of 594.2 million rupees ($12.2 million), at a rate of 2 rupees per 10 rupees face value share," Raha said. "The price is based on our agreement with the Birla group." Over a period of time, HPCL's holding in Mangalore refinery will fall to around 16%, while ONGC will hold nearly 60% of the company.

"We have also been upgrading our Hazira plant, with trial production of aviation turbine fuel scheduled to begin by the end of September," Raha said. "We will begin the conversion of naphtha into gasoline at our Uran plant at around the same time. The two products may be marketed directly or through other public sector oil companies," he added.

Separately, ONGC was reported by the country's comptroller and auditor general (CAG) for overstating its profits by 1.12 billion rupees for the year ended Mar. 31, 2002. Most of the dispute centered around the amount spent by the corporation on drilling a well, PRA-A1, in October 1999 that had not been written off.

Refuting CAG's findings, the ONGC chief said that the net profit of 61.98 billion rupees that the corporation reported for fiscal 2001-02 was absolutely correct, and that there was no overstatement. "Our accounting policies deal with treatment of cost of an exploratory well as a whole only, rather than as portions of a well," Raha said.

"The well PRA-A1, together with the sidetracked portions ST1 and ST2, had been drilled from the same well-mouth, involving no rig move. As such, this has been taken as only one well in our inventory," he said.

ONGC's international operations
Speaking about the company's overseas upstream equity investments—which are managed through ONGC's wholly owned subsidiary ONGC Videsh Ltd. (OVL)—Raha said that the deal to buy an equity stake in the Sudan-based Greater Nile Petroleum Operating Co. (GNPOC) had not yet been concluded (OGJ, June 24, 2002, p. 36).

However, GNPOC joint venture partner China National Petroleum Corp. (CNPC), has agreed to waive its right of refusal when the topic of OVL's buying Talisman Energy Inc.'s 25% equity stake in the project for $750 million comes up at the next meeting of the project's joint managing committee.

The GNPOC JV is run by a consortium that includes CNPC 40%, Malaysia's Petronas Carigali Sdn. Bhd. 30%, and the Sudanese national firm Sudapet 5%, in addition to Talisman.

"We expect to close the deal soon, and can then expect 3 million tonnes of oil and oil-equivalent gas from Sudan by January 2003," Raha said.

ONGC's Viet Nam gas project, meanwhile, is expected to begin production in December, Raha said, while crude oil and gas production from the Sakhalin-I field in Russia is expected in 2005 and 2008, respectively.

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