ONGC must engage pvt sector to boost domestic output: Oil secy Tarun Kapoor

Wants the energy giant to increase area under exploration; options on the table include selling stake to private players, exploring partnerships

The Ministry of Petroleum and Natural Gas has suggested that Oil and Natural Gas Corporation (ONGC) farm out portions of its producing assets to private entities to boost crude oil and gas output.

This could be in the form of selling stakes to private players and exploring partnerships.

“We are telling ONGC to increase the area under exploration,” Petroleum Secretary Tarun Kapoor told Business Standard.

ONGC’s crude oil output has been steadily declining over the past five years. Standalone crude oil production in 2016-17 stood at 22.249 million tonnes (mt) but it fell to 20.273 mt in 2020-21.

ONGC’s gas production has been going down from 2018-19 after clocking 24.747 billion cubic metres (bcm) and then falling to 22.096 bcm in 2020-21.

“India’s crude oil production should rise. For that, ONGC has to expand its portfolio and do more exploration. It should involve private players for deep-sea exploration and ramping up production in existing fields,” Kapoor added.

He was responding to questions about a letter Additional Secretary (Exploration) Amar Nath had written to ONGC, asking the company to sell a 60 per cent stake in two producing assets to foreign firms.

Amar Nath is also on the board of ONGC as the government’s nominee director.

Further explaining the government’s position, an official said: “The ministry does not interfere in the working of public sector undertakings. The letter gave suggestions to ONGC on ways to increase production. Such proposals have also come from within ONGC.”

“If ONGC wants to expand, it needs to let go of some functions and outsource them. This is the approach adopted by successful national oil companies,” the official added.

In his letter to ONGC Chairman Subhash Kumar, Amar Nath said: “To expand the exploration sector in the country, ONGC must divest its Drilling and Well Services arms by various modes such as Start-up, lnvestment Trusts, societies, firms, and companies others.”

“By hiving off services/drilling business, the company can become (asset-light) with the same top line, increase capital efficiency, help in expanding the domestic (exploration) and production (E&P) sector, bringing competition and cost reduction,” Nath’s letter, dated October 28, 2021, said.

The official said: “We need to have at least 25 large companies in the upstream sector in India. Now there are only four large ones, two each in the public and private sectors.”

Amar Nath’s letter identified two assets -- the Mumbai High Offshore and Bassein and Satellite (B&S) Offshore -- which need to have production enhancement models. While identifying these ageing assets, Amar Nath said oil recovery from them would decline and ONGC would need an “experienced international partner” for boosting output. He recommended giving a 60 per cent participating interest and operatorship in both these assets to these foreign partners.

However, ONGC does not seem keen on shedding stakes in producing assets.

“We are not asking ONGC to give away the producing oil wells. There is an unexplored area in both these assets and it is these areas that can attract more partners,” the official said.