ONGC to sell 30% stake in K-G block

Nearly four months after Reliance Industries Limited signed a deal with British Petroleum for getting BP's technology for deep-sea exploration, state-run Oil and Natural Gas Corporation is in talks with BG Exploration and Production, India, and Italian exploration and production major, ENI, to sell up to 30 per cent stake in its Krishna-Godavari DWN 98/2 block. Cairn India is already a 10 per cent partner in the block.

The block is right next to the KG-D6 block of RIL in the K-G basin, off the east coast.

RIL in February sold 30 per cent stake in 23 of its oil and gas blocks to BP for $7.2 billion, as part of a long-term deal that involves a total investment of $20 billion.

When contacted, two board members of ONGC confirmed that the company has been in discussions with BG and ENI for technological assistance and is willing to offer up to 30 per cent in the block.

"Giving away more will result in losing control and, in turn, our decision-making ability. We want an international partner who can get us the technology for deep-sea exploration. Both BG and ENI have it.

"These players are experts in deep water and know exactly how to go about the routine of the block," one of the board members said.

He added the discoveries in KG-DWN-98/2 and three in adjacent blocks together hold 6.37 trillion cubic feet (tcf) of in-place reserves. RIL's KG block holds in place reserves of 11.3 tcf. 

ONGC, along with its partners, plans to spend around Rs 36,000 crore on developing the block.

When contacted, the BG India spokesperson said, "We did visit the data room. We will take a call on this as and when we hear from ONGC."

KG-DWN-98/2, which has 10 gas discoveries, was awarded under the New Exploration Licensing Policy, which allows ONGC to farm out a participating interest (equity stake) to foreign firms.

ONGC plans to tie up its KG basin discoveries with six gas finds in neighbouring 1G block and is seeking approval from the oil ministry. The ministry, however, is taking time to grant approval. 

Block 1G was given to ONGC on nomination basis.

It cannot sell stake to any firm and can at best involve a foreign firm as a service contractor.

ONGC has partnership with BG India in three blocks in KG offshore, two operated by ONGC and one operated by BG. Petrobras and ENI have also partnership in one block each.

In 2007, ONGC farmed out 15 per cent interest in the block to Brazil's Petrobras and 10 per cent to Norway's Statoil.

Both however, gave up the partnership due to delay in seeking approvals from the oil ministry for their respective farm-ins.

ONGC is keen to fast-track development of discoveries in the basin, given the forecast rise in India's unmet gas demand.

"We have not been able to discover a giant field in on-land area. But we have been successful in  bringing two new basins -- Krishna-Godavari and Cauvery located in south -- on the hydrocarbon map of India," the official added.

ONGC has entered into a period of exploration for appraisal after completing the exploration MWP commitments in block KG-DWN-98/2.

The company plans to start producing 25-30 million standard cubic metres per day of gas from the block in 2016-17.

The blocks is divided into two discovery areas -- the Northern Discovery Area consisting of the Padmawati, Kanakadurga, Annapurna, N-1, D/KT, U, A, W and E gas finds in water depths ranging from 594 metres to 1,283 metres and the Southern Discovery Area consisting of the UD-1 discovery falls in ultra-deepwater with a depth of 2,841 metres.