Dharmendra Pradhan: Government to Auction 69 Marginal Oil Fields

Oil Minister Dharmendra Pradhan said on Sunday that the government plans to auction 69 small and marginal oil and gas fields to private firms on a new revenue sharing model.

As many as 63 discovered oil and gas fields are being surrendered by state-owned Oil and Natural Gas Corp (ONGC) as they were found to be uneconomic for a large firm with huge overheads to develop or bring to production. Smaller firms with a fraction of operating cost can develop them at a much faster and economic rate.Oil India Ltd (OIL) has surrendered 6 marginal fields.

“We are looking at marginal field auction round on a new revenue sharing model soon,” Mr Pradhan said on the sidelines of Geo India 2015 conference here.

Under the revenue sharing model, bidders will have to upfront state how much oil and gas they will share with the government. The firm offering maximum will win the right to explore and produce from the field.

This is a shift from the much-criticised production sharing contract (PSC) regime where blocks were allocated to firms that bid the highest amount of work in the area.

It allowed the firms to recover all their cost before sharing profits with the government, a regime which was criticised by the Comptroller and Auditor General or CAG as one that provides incentive to operators to keep raising cost so as to postpone government share.

His ministry is currently preparing the policy guidelines for the auction, and if the Cabinet Committee on Economic Affairs (CCEA) approves, it would mark shift to the new bidding regime as was recommended by the C Rangarajan Committee.

ONGC holds about 165 marginal fields (79 offshore and 86 onshore). Of which, 63 are being surrendered for auction.Of the 165 fields, with total ultimate reserves of 340 million tonnes, operations are going on in 139 and work is yet to start on 26.

Marginal fields were given to ONGC before the licensing rounds on nomination basis. Hydrocarbons resources are locked up in these fields, but they cannot be produced economically on a standalone basis, or with a conventional approach.

Source:Ndtvnews