New Delhi: Much before the highly acclaimed $7.2 billion Reliance-BP deal, it was state-run ONGC that had proposed a strategic alliance with Europe’s second biggest oil firm but was rejected by the oil ministry.
While BP Plc on Monday agreed to pay $7.2 billion for a 30% stake in most of Reliance Industries’ oil and gas blocks including the gigantic eastern offshore KG-D6 fields, the UK firm had in 2005-06 proposed to partner ONGC in three of its deep-sea blocks off the east and west coast.
Industry sources said BP had made a formal proposal to take 40-50% stake in Oil and Natural Gas Corp’s (ONGC) Krishna Godavari and Gujarat-Kutch basin block but the then oil minister Murli Deora and DGH V. K. Sibal had rejected it.
The oil ministry had also frustrated ONGC’s attempt to bring in Norwegian oil major Statoil and Brazil’s Petrobras in its gas discovery block KG-DWN-98/2, which sits next to Reliance’s giant KG-D6 fields.
ONGC had in August/September 2007, proposed farming out (or in simple terms given out) 15% interest in the block to Petrobras and 10% to Norsk Hydro (now Statoil Hydro).
But the ministry did not approve the farmout for almost a year, forcing the two companies to call it quits.
Oil secretary S. Sundareshan says New Exploration Licensing Policy (NELP), under which Reliance had won all the 23 blocks in which it is giving stake to BP, allows assignment of participating interest and his ministry will examine the Reliance-BP deal on merits.
ONGC too had won the KG-DWN-98/2 block in the same round of NELP in which Reliance got the neighbouring KG-DWN-98/3 or KG-D6 in 1999. But the state-owned firm never won approval to assign or farm-out interest to deepsea technology firms.
Sources said in case of BP, the UK firm was particularly interested in partnering ONGC in Kutch basin block GK-DW-1 that shared boundary with its blocks in neighbouring waters of Pakistan.
BP and ONGC had in September 2007 even signed a MoU for carrying out seismic surveys in the Kutch basin of Gujarat.
Sources said the oil ministry had used the ground that petroleum exploration license (PEL) for the three KG deepwater blocks was ending in May 2007 and for the Kutch block in August 2008. It did not deem it fit to extend the license and instead decided to offer the blocks in next bid rounds.
Despite British government pushing for the deal, the oil ministry held its ground and gave its final rejection in 2007.
Just around the same time, BP and Reliance entered into dialogue in what fructified into a deal where the UK firm picked 30% stake in 23 out of Mukesh Ambani firm’s 29 exploration blocks.
Not just KG-DWN-98/2, the oil ministry also stonewalled farm-out in at least one more block.
In deepwater block CY-DWN-2001/1 in Cauvery basin, amendment to the Production Sharing Contract (PSC) duly signed by ONGC, Oil India and Petrobras was submitted for clearance by the government in January 2009. It also met with the same fate as the KG basin block.
Sources said the blocks BP was interested in were part of the six deepwater areas that ONGC was given on nomination basis in 2000. Three of these were located in KG basin, two off the west coast in Kerala-Konkan basin and one block in the Gujarat’s Kutch basin.
While the blocks were given on nomination basis, New Exploration Licensing Policy (NELP) terms were extended to it. These included financial benefits like tax breaks on income from hydrocarbon produced.
Also, the government permitted the company to join hands with experienced exploration and production companies.