Mumbai: Oil & Natural Gas Corp. (ONGC), India’s biggest explorer, has offered to exchange, with Eni SpA (an integrated energy firm), an Indian oil area for a location in the Congo basin in order to get deepwater exploration technology from the Italian company.
Eni has been offered as much as 35% in an area in the Mahanadi basin off India’s East coast, D.K. Pandey, director of exploration at ONGC, said. The firm will, in turn, take close to 25% in Eni’s block in Eastern Africa.
ONGC’s focus on deepwater exploration is aimed at boosting domestic output and offsetting declining reserves from aging fields such as Bombay High in the Arabian Sea. The company doesn’t have the technology to drill in depths of more than 1,000m.
“The company urgently needs deepwater expertise,” said Ballabh Modani, an analyst at Mumbai-based Batlivala & Karani Securities Pvt. Ltd. “This deal makes a lot of sense for ONGC.” Batlivala & Karani has a “buy” rating on the company.
ONGC shares rose Rs24.5, or 2.8%, to Rs890.25 at 1.11pm on the Bombay Stock Exchange. It closed at Rs884.85, up 2.21%.
Eni will share the $90 million (Rs396 crore) cost to explore in the Mahanadi field, Pandey said. Work will begin soon after ONGC gets permission from the Union government.
The company is expected to sign the agreement with Eni officials in Mumbai on Wednesday and has approached Brazil’s Petroleo Brasileiro SA, Norsk Hydro ASA and BP Plc. for similar deals, he said.
“We need new ideas, experience and deepwater technology,” Pandey said.
In September 2006, India’s oil and gas regulator V.K. Sibal had recommended that a penalty of $107.4 million be imposed on ONGC for not completing exploration in areas it won though the so-called New Exploration and Licensing Policy (NELP), through auction of oil and gas areas.
Pandey said the deal is the result of a cooperation agreement signed with Eni in September 2005. ONGC and Eni are exploring areas in the Andaman Islands, off India’s Eastern coast, and in Rajasthan as part of the agreement, he added.
State-run ONGC last week won rights to explore 24 areas of the 55 offered in India’s largest auction of oil and gas areas in the sixth round of NELP.
The finds in the Krishna Godavari and Mahanadi basins may yield “substantial gas”, ONGC’s acting chairman R.S. Sharma had said on 18 January.
The reserves in the new find in the KG basin in the Bay of Bengal may total 21 trillion cubic feet compared with previous discoveries in the area totalling around three trillion cu. ft, PTI had said on 17 December.
The company also found as much as four trillion cu. ft of gas in the Mahanadi basin, off the coast of Orissa, the news agency said.