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New Delhi, Nov. 22: The cabinet committee on economic affairs will soon take up a petroleum ministry proposal to allow Oil and Natural Gas Corporation Limited to auction off its small unviable oil and gas fields.
The ministry hopes the entry of new players with superior technology will make the fields viable.
Sources said the ministry had approached the CCEA for approval of the marginal field policy.
ONGC, under the policy, can auction off fields where discoveries have been made but no investments committed for further development.
The government had awarded ONGC the marginal fields on a nomination basis. The PSU did not commercially develop the fields as it lacked technological expertise.
ONGC will invite global bids for the development of these marginal fields. Successful bidders will have to begin production from the onland fields within three years and from the offshore fields in five years.
Two options are available before the PSU — either it buys the entire produce from the developer for a fee or the developer shares the output.
Besides, the developer will pay half of the applicable royalty and be exempt from paying a cess of Rs 2,500 per tonne on oil.
According to a draft of the policy, sources said, auctions will be for the onland fields of ONGC that have been discovered after May 1, 2008, and not started production by April 2013.
Offshore fields up for sale are those discovered after May 2008 that have not started production by April 2015.
Developers may negotiate with state-owned oil firms to use the excess capacities of the companies’ pipelines for the transportation of crude and gas.
ONGC has 165 marginal fields, of which 144 are producing oil and gas or will commence production.
The remaining 21 fields may be auctioned for development through a globally competitive bidding.
Of these 21 fields, 13 are onland — five in Gujarat, one in Rajasthan and seven in Andhra Pradesh. The remaining eight are in the shallow waters along the western coast.
The 21 marginal fields comprise five oil fields (four onland and one offshore), 14 gas fields (nine onland and five offshore) and two offshore oil and gas fields.
They are estimated to have crude reserves of 496,900 tonnes and gas reserves of 1.519 billion cubic meters.
ONGC has reported a six per cent increase in net profit at Rs 5,089.64 crore during the second quarter ended September 30, 2009. The profits were lower by Rs 1,491 crore as it was asked by the government to pay Rs 2,630-crore fuel subsidy by way of discounts on the crude it sells to the state-run refiners. The subsidy payout, however, was lower than the Rs 12,663-crore payout in the same period last fiscal.
Sales during the period fell to Rs 15,080.59 crore from Rs 17,407.40 crore on a dip in production and crude prices.