ONGC's rig, Sagar Vijay, has already reached the Cauvery basin and work will begin by the end of this month. It will mark the corporation's debut in deepwater exploration for which it has earmarked Rs 200 crore during the current financial.

At present, ONGC is in talks with a host of companies for its deepwater endeavours. These include Petrobras of Brazil, Shell, Mobil and many others. Sources reiterated that talks were in the preliminary stage and a final decision would take some time.

As per the current thinking in ONGC, the potential partner would not participate in the equity but confine itself to lending technicalexpertise for the project. "This will be an unincorporated joint venture and no separate company will be created by ONGC," sources said.

The other regions which have been identified for deepwater exploration are the Kerala-Konkan and Kutch basins. There is every likelihood of the foreign partner teaming up with ONGC in these areas. Interestingly, there have been unconfirmed reports in the ministry of petroleum and natural gas that Indian Oil Corporation could partner ONGC in its deepwater efforts. The two signed a memorandum of understanding recently to share expertise in upstream and downstream efforts. This could translate as a joint venture subsequently and sources say that Enterprise Oil of the UK could be roped in as a third player to help out in the exploration endeavours.

ONGC also plans to seek a higher price for crude discovered in the deep seas as the current formula of reimbursement may not be very attractive to foreign companies. Effective April 1, the cost plus formula has been removed andcrude producers like ONGC will be paid 75 per cent of the weighted average FOB (free on board) price of actual imports.

At present rates, this works out to around $10.75 per barrel which is lower than the international price of crude which is hovering around $13 per barrel. Such a price would not lure international players to team up with the ONGC in its deepwater efforts and the corporation plans to bring up this issue with the centre. "Deepwater exploration is a high risk activity and no company will work in India under the present pricing formula," sources told The Financial Express.

They added that the payment for exploration work in the deep seas can follow the pattern in the mid-size discovered fields where ONGC has teamed up with a consortium of companies. Payment for crude is made at international rates without the present formula of 75 per cent of the weighted average FOB price.

Some of these projects which qualify for this whole payment include the Tapti, Mukta and Panna fields whereONGC has a 40 per cent stake with the balance held by Enron Oil and Reliance Industries and the Ravva field where ONGC's partners are Command Petroleum of Australia, Videocon and Marubeni of Japan.