NEW DELHI, February 20: The Oil and Natural Gas Corporation (ONGC) is weighing the option of giving up the Neelam oilfields, after having drawn a blank in its efforts to upgrade the output of the "difficult" offshore property on Bombay High."Our last option," said ONGC chairman and managing director Bikash Chandra Bora, "will be divestment of the property," adding that the company was still awaiting a nod from the Centre for enlisting an overseas partner.
Meanwhile, exploration and production (E&P) consultants Degolyer and McNoughton, who were engaged to help boost the dwindling output of the field, have recently concluded their study.
The consultants are also understood to have assessed the reserves of the field, which was initially believed to contain 130 million tonne of oil. Should the reserves prove too small to make production commercially viable, auctioning off the field may prove a smarter business decision for ONGC. "We will assess the reserves," Bora said, without confirming reports thatpreliminary assessments had pegged the reserves at roughly 60 per cent of the oil which the Neelam fields were initially estimated to contain.
The company had early last year proposed a joint venture with a strategic partner, that could bring in state-of-the-art technology into the problematic field. The union petroleum ministry had endorsed ONGC's suggestion that 50 per cent stake in the Neelam fields be offered to the "strategic partner." The proposal was forwarded to the union cabinet and a decision was still pending when parliament was dissolved for fresh elections.
Even though ONGC prefers to stay optimistic that a new government may take a fresh look at the idea, industry watchers think otherwise. The recent controversies over awarding discovered fields to the private sector (the best known of which is the acquisition of the Mukta-Panna fields by the Enron Oil and Essar Oil combine) were unlikely to hasten policy decisions on privatisation, they said. The strategic alliance between a technologysupplier and a property owner, was expected to serve as a model for all such discovered fields, where operations had been rendered uneconomic because of depleting reserves and output.
The output of the Neelam fields have dwindled to almost a third of the nearly 90,000 barrels per day that ONGC was producing there since 1993. The alliance between a transnational and ONGC would have also enabled the public sector enterprise (PSE) to claim international prices for the Neelam crude.
While international prices of crude will be available to companies bidding for new exploration blocks as part of the new exploration and licensing policy (NELP), the existing fields will only get a percentage of a weighted average of the FOB(freight on board) price of imported crude in the coming months. The proposal before the cabinet for strategic alliances between national oil companies and the private sector for discovered fields like Neelam, includes offering international prices for crude to the partners. The ONGC invitedbids from prospective partners and seven multinationals responded, including Shell International of the Netherlands, Total ofFrance, Amoco, Arco, Occidental, Marathon and Chevron. The ONGC chief pointed out that efforts were still on to upgrade the field. One of the asset management teams, created within the ONGC in keeping with the recommendations of its management consultants McKinsey and Company, is working on a turn-around strategy for the field. "Neelam," said Bora optimistically, "should make a turnaround."
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
