Foreign technical partners to have 1st right of refusal on oil finds: Puri

Petroleum minister cites ONGC-BP and Oil India-Petrobras deals as models where foreign technical partners will be given priority rights on oil or gas discoveries

Foreign oil and gas companies entering into technical partnerships with Indian counterparts will be given the right of first refusal (ROFR) in the event of crude oil or gas discoveries, Petroleum and Natural Gas Minister Hardeep Singh Puri said on Friday.

 

Puri cited state-owned ONGC’s recent partnership with BP for the Mumbai High offshore field and Oil India Limited’s (OIL’s) agreement with Brazil’s Petrobras in the Andaman Sea basin. He said such provisions are already in place in these cases.

 

The ROFR is a contractual arrangement that typically allows the holder to enter a business transaction with the grantor before the asset can be offered to any third party. In the context of oil and gas, this right may give a foreign joint venture partner or lessee to match any offer received by the owner of hydrocarbon blocks, such as ONGC or OIL, from a third party, before the asset can be sold or transferred. Officials did not clarify what exact terms have been offered to BP and Petrobras.

 

Puri said foreign entities need to commit large amounts of money for exploration, which sometimes they are not willing to do. “It’s better that they come in as technical partners, for which they will be paid, and when you strike energy, they'll have the right of first refusal,” Puri said at the CII Annual Business Summit here.

 

The minister hinted that rather than entering competitive bidding for oil and gas blocks, foreign entities might prefer this route, arguing it is a 'win-win' for both companies and India.  

 

In February, ONGC signed a contract to enhance production from Mumbai High. Part of the 116,000 sq km Mumbai Offshore Basin in the Arabian Sea,

 

BP Exploration (Alpha) Ltd, a London-incorporated, wholly-owned subsidiary of BP Plc, was appointed as a Technical Services Provider (TSP). At the time, ONGC had said: “The TSP has indicated a substantial increase in the oil and oil equivalent gas production (up to 60 per cent) from the baseline production levels (reputed third-party vetted production estimates with natural decline) over a 10-year contract period," ONGC had said back then.

 

Similarly, in February, OIL signed a Memorandum of Understanding with Petrobras to leverage the Brazilian major’s deepwater drilling expertise in the deep and ultra-deep offshore regions, including the Andaman basin. The collaboration also covers the Mahanadi and other sedimentary basins.

 

One big find

 

The government’s 2016 shift from a production-sharing regime to a revenue-sharing agreement for foreign entities was necessitated by the disagreements and litigation experienced in the previous regime, Puri said. “A revenue-sharing agreement is easier, and a lot of these (foreign companies) are not willing to commit upfront,” he said.

 

Referring to oil-rich Guyana, Puri said there could be many “Guyanas” waiting to be discovered in the Andaman Sea. “One big find in the Andaman sea will change everything. It will be a huge transformation in India's economic strength,” Puri said.

 

The average expenditure for digging a well onshore is $4 million, while it is exponentially higher at about $100 million offshore. Guyana dug 47 offshore wells before they struck oil, Puri said. He revealed ONGC has dug the highest number of wells in 37 years in FY25. 

Minister speaks

 

* Petroleum and Natural Gas Minister Hardeep Singh Puri expects global crude oil prices to be near $65 per barrel, won’t reach $80/bbl

 

* Optimistic that sanctions would reduce and Iran would become a major supplier again

 

* Energy imports from the US can be expanded to $25 billion

 

* 79 CBG plants operational, more than 100 projects under execution