NEW DELHI: State-run explorer ONGC has decided to rope in
BP
as technical partner to boost
oil and gas production
from
Mumbai High
India’s crown jewel, which will become the UK major’s second operating project in India and mark the first notable MNC entry in the country’s upstream sector following reforms initiated by the
Narendra Modi government
.
BP bagged the 10-year contract, bids for which were invited in June last year, outbidding rival Shell — the only other bidder — with an offer to raise output by upto 60% over the baseline production.
BP is no stranger to India’s upstream sector, having bought 30% stake iin Reliance Industries Ltd’s KG-D6 block off the Andhra coast for $7.2 billion in 2011. It currently operates a $5-billion gas project in the block. It’s joint venture with Reliance has also joined hands to bid for exploration rights. Last September, the company board paid a visit to India — the second since 2013 — amid the bid evaluation to signal its interest in the country.
But unlike in KG-D6, the ONGC contract does not entail any transfer of stake in Mumbai High. As the technical service provider, BP’s role will be limited to reviewing the field’s performance, identifying improvements and implementing suitable technological interventions/practices for raising production. BP will get a fixed service fee and a share of the revenue from sale of incremental volumes resulting from its technical interventions.
ONGC had offered the contract on the basis of the highest quarterly incremental production offered by a bidder and the lowest revenue share sought. The tender was open for only companies with anual turnover of $75 billion, on top of the requisite expertise, which left several other global players out of the ring.
The success of the Mumbai High bid redeems the failure of similar efforts made by the company in the past to improve recovery and arrest the natural decline in production from several fields in the western region. This latest move through the technical partnership route came after two initiatives in the oil ministry three years back to hive off the field to private sector/MNC was stalled by strong opposition from ONGC and within the government.
The contract with BP shows a way to rekindle interest among global majors — who have been lukewarm to the acreage auctions — and build upon fiscal and policy reforms in the exploration & production sector undertaken by the Modi government since coming to power in 2014.
