Nearly 25 years after ONGC's prime discovered oilfields were privatised, the government is planning to allow private firms to take majority stake in the state-owned firm's producing oil and gas fields such as Mumbai High.
The Oil Ministry plans to approach the Cabinet soon for allowing private firms to take participating interest (PI) in a nomination block, sources privy to the development said.
The policy currently allows giving out of PI or a stake to a private company only in the blocks or areas awarded in open auctions under New Exploration Licensing Policy (NELP) since 1999. However only exploration acreage was auctioned under global bidding in such rounds.
All areas prior to that were given to Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) on a nomination basis.
ONGC produces 87 per cent of its 25.53 million tonnes of oil from fields given to it on nomination basis. As much as 95 per cent of 23.28 billion cubic meters of annual gas production comes from nomination blocks.
The nomination fields include Mumbai High, India's biggest oil field, and Bassein gas field, the nation's biggest natural gas producer.
Sources said the ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms would help raise output as they can bring in technology and capital.
It has been tasked by Prime Minister Narendra Modi to cut oil import dependence by 10 per cent by 2022 over 77 per cent dependence in 2014-15. The dependence has only increased and is now over 80 per cent.
Sources said initially ONGC got service companies involved in raising output by offering them incentive if production was raised by pre-set milestones over and above the current levels.
However, the services companies are not willing to take sub-surface risk which only oil and gas exploration and production companies can take, prompting the ministry to moot this idea of privatisation by giving 50-60 per cent stake in nomination blocks.
The privatisation is repeat of the infamous round in 1992-93 when medium sized discovered fields like Panna/Mukta and Tapti oil and gas field in the western offshore was given to now defunct Enron Corp of US and Reliance Industries.
As many as 28 fields were then awarded. Under this regime, ONGC was made licensee and given an option to farm-in 40 per cent of stake.
The controversial privatisation under the then oil minister Satish Sharma had resulted in a CBI inquiry.
Sources said the Directorate General of Hydrocarbon (DGH) has backed the move of getting private and foreign firms in producing oil and gas fields of ONGC and OIL.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)