In a setback to state-run ONGC, US-based ConocoPhillips, a key partner in its ambitious exploration and production (E&P) projects, is rethinking giving technology and equity support to the latter’s deepwater resources. The Houston-based energy major’s apparent back-tracking from the terms of an MoU signed with Indian PSU in March 2012 where the latter’s domestic deepwater blocks was a highlight, is seen as a fallout of the continuing imbroglio over gas pricing in India besides an unreliable regulatory framework.
ConocoPhillips’ input is critical to ONGC’s much-vaunted KG block, for which the PSU has lined up plans to invest $9 billion by 2030.
Confirming the development, a senior ONGC official told FE: “Last year, we had signed an MoU with ConocoPhillips for shale gas and deepwater projects in India; the US and other parts of the world were covered under it. It was basically about their interest in any of our deepwater blocks. However, they might not come in for deepwater (production),” a senior ONGC official said. The US energy giant, however, remains committed to ONGC’s shale gas ventures.
The PSU has been in talks with Shell to sell stakes in KG block but hasn’t got any definite commitment from the Anglo-Dutch oil and gas major as yet.
ONGC has little experience in producing from deepwater blocks and is counting on the expertise of foreign partners to produce from these technologically complex zones.
It was earlier reported that ONGC had sought ConocoPhillips technology for deepwater exploration in around 19-20 blocks.
The ONGC official added there are several compelling reasons that dissuade foreign firms like ConocoPhillips from participating in Indian deepwater blocks. First, there are huge investments worth billions of dollars associated with such blocks. Second, the recent controversy around Reliance Industries’ KG D6 block (the government wants the company to pay up for not meeting its production targets) has dampened the general investment climate in India even as there are attractive opportunities for energy MNCs in other parts of the world. “The current gas price of $4.2/mmBtu is not remunerative enough, and uncertainty looms large over the revision based on the Rangarajan Committee recommendations,” the official said. The matter is also before the Supreme Court.
The biggest casualty of ConocoPhillip’s decision could be on ONGC’s gas-rich KG basin block which is said to hold about 4.85 trillion cubic feet (tcf) of gas reserves (22 mmscmd of gas at peak production) and has shown good prospectivity for oil