Mumbai: State-run explorer Oil and Natural Gas Corp’s hunt for foreign expertise to develop its gas-rich block near the huge D6 producer has dropped to two players, BG Group and Eni .
ONGC chairman A.K. Hazarika said talks were continuing with Italian oil major Eni and BG Group only for the sale of up to 30% stake in the block off India’s east coast.
“We can go up to 30%. We haven’t decided yet. It will be discussed by the board,” Hazarika told television channel ET NOW. Development of the block is expected to cost $7.7 billion, Hazarika said.
Last year, the then head of exploration at ONGC, D. K. Pandey, said Exxon Mobil and BP were also eyeing stakes in the KG-DWN-98/2 block, from which Brazil’s Petrobras and Norway’s Statoil had already exited.
In February, BP decided to team up with Reliance Industries , which operates the D6 field, for exploration in India and agreed to buy a 30% stake in 23 of its oil and gas blocks for $7.2 billion.
“Exxon is no longer interested,” said an ONGC company official who did not wish to be identified.
Foreign companies are often apprehensive about investment in India’s oil and gas sector as bureaucratic delays and disputes can prove costly obstacles. BP and Reliance are still awaiting approval from the government for their deal.
ONGC is currently contesting royalty payments with Cairn India , delaying the latter’s sale by its parent Cairn Energy to Vedanta Resources .
The ONGC official said the company’s deepwater block in Krishna Godavari basin has a potential to produce at least 87 billion cubic metres of gas cumulatively.
He added gas production from the block is expected to begin four years after the company gets approval from the government for drilling eight additional wells.
“We do not have clear approvals for drilling these additional wells,” the offical said, adding the entry of foreign players is linked to government approval for this additional drilling.
ONGC needs the expertise of foreign players to boost its local oil and gas output, as it struggles with declining production from its marginal and aged fields.