India’s largest exploration and production firm, Oil and Natural Gas Corp. (ONGC), is close to signing a deal with Canada’s Canoro Resources Ltd for the sale of a 20-30% stake in its exploration blocks in Nagaland.
This will “derisk” ONGC’s exploration efforts in a state where it suspended them in 1994; last year, the company signed a deal with the state government for exploration licences in five blocks. The partnership could also help ONGC address the shortage of technical staff and give a boost to the local economy.
“While we (ONGC) plan to remain the majority partner, Canoro will be the operator for the block. The state government later plans to take a 10% stake in the block. We are exploring this opportunity both for the producing block and the greenfield ones,” said a senior ONGC executive who did not wish to be identified. The two companies are expected to finalize the deal shortly and make an announcement.
ONGC has six blocks in Nagaland, of which one is a producing block (where it produces oil) and the rest, exploration blocks (where it is exploring for oil). The company’s exploration efforts in Nagaland had previously been obstructed by an outlawed faction of the National Socialist Council of Nagaland, a separatist outfit.
ONGC currently operates 62 blocks in the country and has participative interest in 10 others.
India imports almost 70% of its oil and gas requirement and ONGC has increasingly come under criticism for its inability to step up the pace of exp-loration activity to match the economy’s growth rate.
The Indian economy expanded by 9.4% last year and is expected to grow by at least 8% this year.
Partnerships with firms such as Canoro would “ease pressure on ONGC’s technical manpower—created due to the rising attrition level in the specialized fields,” said another ONGC executive who also did not wish to be identified. “These companies will come in with their own engineers with specialized skill sets to do the work,” he added.
Prayesh Jain, an analyst at stock market research firm India Infoline, said the interest shown by Canoro in acquiring a stake in ONGC’s blocks is a good indicator of the hydrocarbon potential in India.
“Indian E&P (exploration and production) companies recently have been in the news for taking stakes in hydrocarbon blocks overseas, but it is only now that foreign companies have started looking at acquiring stakes here,” he added.
Canoro, which operates on its own in India’s Northeast, recently signed an agreement with ONGC to explore the possibility of collaborating in that part of the country, including joint bids for blocks being auctioned as part of the next round of the New Exploration Licensing Policy.