UK-based gas producer BG Group has decided to exit three oil and gas blocks it has been exploring jointly with state-run ONGC by making a payment of $50 million to the Indian company to carry out the unfinished work, ONGC chairman Sudhir Vasudeva said on Wednesday.
Before the exit from the partnership, BG Group?s Indian arm, British Gas Exploration and Production India (BGEPIL), had a 25% stake in the Mahanadi deep water block MN-DWN-2002/2, 45% in KG OSN 2004/1 block and a 30% interest in KG 98/4 block. Now ONGC will have the entire stake in these blocks. ?This is a re-assignment of the block to us,? Vasudeva said. He said global energy majors are in a continuous process of consolidating their portfolio in various ways, focusing on certain continents and energy sources. The exit of BG Group from these blocks are a reflection of that. The payment is for fulfilling the work programme, which is a commitment as per the production sharing contract that both the companies have signed with the government, Vasudeva explained.
ONGC officials said the company barely has the cash reserves to carry out its exploration and production programme and hence will not be able to buy back government of India shares in the company as has been proposed. Of the company?s cash reserves of R22,000 crore, R8,100 crore has been kept for site restoration of the blocks that the company would relinquish to the government, a statutory commitment. Another R5,000 crore has been set aside for other commitments, leaving the company with only R14,000 crore. This is just enough to meet the energy company?s other requirements. ?If the subsidy outgo goes up in the coming quarters, ONGC will have to dig into its cash reserves, company sources said.
