New Delhi: Oil and Natural Gas Corporation (ONGC) has suffered a setback in its efforts to get 25% stake in the prospective Satpayev oil field in the Caspian Sea after Kazakhstan backtracked on its commitment.
After three years of negotiations, Kazakhstan is now offering OVL, the overseas arm of ONGC, only an exploration contract for Satpayev wherein the Indian flagship will get a fixed fee for its efforts, industry sources said.
Kazakhstan had initially identified Satpayev and Makhambet blocks in the Caspian Sea for giving 50% stake in one of them to OVL. Later, it reduced the stake on offer to 25% and conditioned the Indian flagship’s entry to it teaming up with steel baron Lakshmi N Mittal.
OVL relented and in June last year made an attractive commercial proposal to KazMunaiGas (KMG), but in subsequent negotiations, the Kazakhstan’s state-run firm did not agree on the percentage of stake OVL would get. It also did not agree on operatorship to OVL during exploratory and appraisal stage.
Sources said this year Kazak Parliament began discussing introduction of a new tax code and pending, which a moratorium on all the ongoing negotiations was declared.
Kazakhstan government has decided not to sign any Production Sharing Agreement (PSA), which entail companies getting a stake in oil and gas fields, and only exploration contracts would be signed.
In case of commercial discovery, the contractor will have the first preference to sign PSA, they said, adding the new tax code would mean all the negotiation on commercial terms would be reviewed again after the code is adopted.
An exploration contract defeats the purpose of energy security as India is using OVL to secure oil assets overseas to cut its import dependence.