<p>Oil and Natural Gas Corporation (ONGC) has decided to sell around 35 per cent of its stake in four of its coal-bed methane (CBM) blocks. The state-run company will offload its stake to the bidders for a certain financial consideration and production sharing at a later stage, according to sources close to the development.
The stake could be farmed out as a consortium or on an individual basis. According to an ONGC board member, the board was divided on whom to sell the stake. A final call is expected to be taken by the board in its next meeting. The Dehradun-headquartered company has already held consultations with the ministry of petroleum and natural gas on the issue.
UK-listed Great Eastern Energy Corporation Ltd (GEECL) and Brisbane-based Dart Energy, in addition to Essar Energy, have bid for the stake. “We will have to give some up-front payment to meet ONGC’s past investment cost and the rest would be in the form of production sharing,” according to a senior member from one of the bidding companies.
|ONGC HOLDS 4 CBM BLOCKS
|Rs 510 crore Spent by ONGC so far on these four blocks which the winning bidder might have to cough up in proportion to its stake
- Board was divided on whom to sell the stake
- Final call expected to be taken in its next board meeting
- It has already held consultations with the ministry of petroleum and natural gas on the issue
ONGC holds four CBM blocks in Jharia, Bokaro and Karanpura (North Karanpura and South Karanpura), all of which are in Jharkhand and Raniganj in West Bengal. It has an incidental production of 8,000-10,000 mscmd (million standard cubic metres per day) from the Jharia block of Dhanbad district.
The 1956-founded company has been exploring farm-in opportunities for faster exploitation of CBM resources. Planned investment for the blocks is Rs 5,000 crore. Production from blocks will increase 600-fold to six mscmd in 10 years.
At its CBM blocks, ONGC has been facing various issues like not being able to manage land acquisition issues and the cycle speed of rigs, among others.
The company has maintained that due to being isolated at these blocks, which are stand-alone, it is facing certain issues and wants to bring in a joint operator.
ONGC has so far spent around Rs 510 crore on these four CBM blocks which, the winning bidder might have to cough up in proportion to his stake.
At its Raniganj North block, ONGC is the operator with 74 per cent stake. Coal India holds the rest 26 per cent. At Jharia, it holds 90 per cent stake and Coal India holds 10 per cent. At Bokaro and North Karanpura, it is also the operator, with 80 per cent. IndianOil Corporation holds the remaining stake.
“We have bid for operatorship,” said a senior executive from one of the bidding companies. “So, when we develop the blocks, we will invest according to our respective shareholding in the block. There will, however, be certain rights attached to the deal.”
ONGC estimates say its Jharia block holds around 85 billion cubic metres of gas reserves. While North Karanpura holds 62 billion cubic metres of gas reserve, Bokaro holds 45 billion cubic metres and Raniganj North holds 43 billion cubic metres.
Dart Energy, one of the bidders on its website, says it is in advanced negotiations to farm in to one or more CBM blocks that were awarded to ONGC during the CBM-1 bidding round in 2003.
GEECL, another bidder, is the first company in India to begin commercial production of CBM gas from its Raniganj Block. Its promoter, Y K Modi, had earlier confirmed his company’s interest in ONGC’s blocks.
CBM is natural gas, trapped within coal formations. The gas is extracted by drilling holes into the seams that contain gas and are commercially unviable for coal mining. The government has so far held four rounds of bidding for CBM blocks and awarded 33 contracts.