The National Democratic Alliance (NDA) government is considering a proposal by a high-level committee to take away 97 oil and gas fields being explored by the Oil and Natural Gas Corporation Ltd (ONGC) and Oil India Ltd (OIL) and auction them to private sector energy companies, two government officials aware of the development said.
The committee comprising top civil servants, including cabinet secretary PK Sinha and headed by NITI Aayog vice chairman Rajiv Kumar, has proposed “complete marketing and pricing freedom” to potential investors, one of the two officials said on condition of anonymity. These are part of 149 marginal fields that contribute about 5% of the country’s total oil and gas production.
The committee has, however, allowed ONGC and OIL to retain 52 of the total 149 marginal oil and gas fields on the condition that they deliver results in terms of production and financial performance within a definite time frame, the first official added.
According to the committee’s report, ONGC and OIL are on notice for these 52 fields.
They may lose these fields if they fail to perform, officials said.
“In these retained fields, NOCs [national oil companies] need to adhere to approved production profile. If they fail, even these fields shall be considered for taking back and privatisation by the government,” the six-member committee said in its report, which was seen by HT.
The committee submitted its report, “Enhancing Domestic Oil & Gas Exploration and Production”, to the government last month. Other members of the committee are oil secretary MM Kutty, department of economic affairs secretary Subhash Chandra Garg, ONGC chairman Shashi Shankar and NITI Aayog CEO Amitabh Kant.
Out of the 52 fields, ONGC currently holds 49 fields and OIL three. Queries sent to the oil ministry, ONGC and OIL did not elicit any response.
The panel also suggested that ONGC and OIL forge joint ventures (JV) with private entities in 66 lucrative oil and gas producing fields to enhance output from these blocks.
“It is necessary that recovery maximisation regime is adopted by NOCs and if need be, choose field specific implementation model including JV to make it possible to recover the additional oil expeditiously,” the committee said in its report. These 66 fields contribute about 95% of India’s total oil (from 35.7 MMT in 2017-18) and gas (32,648 MMSCM) production.
The committee, in its report, has expressed concerns over surging oil and gas consumption, which are resulting in higher energy imports (82.8% of total oil consumption and 45.3% in the case of gas). Total value of imports was Rs 4,79,377 crore in 2017-18.
“Higher imports are a direct consequence of steady decline in domestic production,” it said.
The report has pointed to two major dampeners for private investments — “poor geology” of Indian sedimentary basins and policy focus on maximising revenue from oil and gas fields.
“The policy and the fiscal regime would have to adequately compensate for relatively inferior oil/gas prospects and the difficult geology. Hitherto instead of compensating for the poor geology, Indian policy has focused on maximising government revenues,” it said.
“It has been highlighted by the oil and gas sector experts in the meeting with the Hon’ble Prime Minister that our existing policy framework, fiscal and approval regimes would have to be made more attractive for both FDI [foreign direct investment] and domestic investments,” it said.
A former board member of ONGC said, “This is nothing but asset stripping. Both ONGC and OIL are listed entities and this move will adversely impact the interests of the minority shareholders”.
“Ideally, the government should wait and see the outcome of 69 blocks already privatised before taking this step. Privatisation is not the only solution. Performance of private companies is also not that encouraging. The proposal should not be hurried, especially when the government’s current tenure is about to end,” the direct-level official said requesting anonymity.