"Effectively, this will translate into an investment-output ratio for each of these fields. The focus of the exercise will revolve around three basic parameters - highest yield, quickest recovery and lowest cost," top sources in the ministry told The Financial Express.

The need for enhancing oil reserves has become especially pronounced what with the rising global prices of crude and products which will make imports more expensive in the months to come. This, in turn, will put a heavy strain on the pool account and estimates are that it will touch a mindboggling Rs 13,000 crore by the end of March 2001.

The petroleum ministry has, therefore, asked ONGC to get on with the IOR exercise on a war footing. "This is the most practical option and ONGC should stick on to its core competence of exploration and production for the moment instead of diversifying into unrelated areas like refining and petrochemicals," experts say.

The ministry is as concerned about Bombay High (now rechristened Mumbai High) where a detailed report on optimising its reserves will soon be submitted by the UK-based consultants, Gaffney, Cline & Associates (GCA).

The restructuring of this all-important field will involve an investment of at least Rs 4,000 crore, a worthwhile effort considering that it is expected to yield oil till 2050. Speculation was rife some months ago that ONGC was considering offering Marathon, UK, a stake in Bombay High as part of a rehabilitation plan. The PSU, however, scotched these rumours as the biggest limitation to any such proposal would involve a "virtual division" of the field, clearly a physical impossibility.

As part of its endeavour to increase local crude output, ONGC plans to hold talks with big names in the world oil business for possible equity participation in six deepwater blocks. The list includes Total Fina Elf, Marathon, Occidental, Shell, Unocal, Exxon-Mobil and Petrobras.

The blocks were recently conferred the benefits of the new exploration licensing policy (Nelp), a request that was made by ONGC to the petroleum ministry over a year ago. The PSU reasoned that this would be the only way to lure world oil majors, who have specialised in the technology of deepwater exploration, to work on these fields. The blocks comprise three in Krishna-Godavari, two in Kerala-Konkan and one in the Kutch basin. ONGC had already earmarked an investment of over Rs 200 crore in these blocks and invited international players for 50 per cent equity participation. At that time, Total and Elf had submitted separate proposals as they were individual entities well before their worldwide merger. The same applied to Mobil which has since merged with Exxon of the US. Overall, there were six companies, the others being Shell, Marathon and Unocal.

The group made it clear that all the advantages of the Nelp, which are available for the new set of 25 blocks taken over by Reliance, ONGC, IOC etc, should be extended to these six blocks too. If this was not done, there was no way they would consider teaming up with ONGC in its efforts in deepwater exploration.

As experts say, this technique for finding crude is relatively new and calls for tremendous expertise and a high budget outlay. It is for this reason that international oil majors have maintained that they will work only if the returns are based on market-determined prices, a benefit conferred by the Nelp. The Centre has already indicated that in this policy, it is proposed to provide equality in terms and conditions to the national oil companies at par with private investors. At the same time, they will have to compete with them for securing exploration licences.

A note issued by the petroleum ministry at the time of drafting the Nelp stated: "In order to compete effectively for investment, we have to offer a fiscal regime which is attractive from the investor's point of view. In our case, this means that we should do away with cess and fix ad-valorem royalty of about 12.5 per cent. In case of deepwater and frontier areas, even this royalty may need to be lowered or exempted to remove fiscal deterrence from exploitation of oil reserves that is otherwise economically viable."