ONGC may have to return 5 blocks

After the euphoria over the recent oil and gas discoveries made by upstream behemoth Oil and Natural Gas Corporation (ONGC), here is the dampener "" the state-owned company will have to relinquish five exploration blocks in different parts of the country.

Subsequently, these are likely to be auctioned under the seventh round of the New Exploration Licensing Policy (NELP). The five offshore blocks "" three in the Krishna-Godavari basin and one each in Kutch and the Kerala-Konkan region "" were given to ONGC on a nomination basis in 2000.

ONGC has failed to discover hydrocarbon content in these five blocks so far. Under the production sharing agreement with the government, ONGC was permitted to rope in a foreign partner for joint exploration in the blocks.

Earlier this year, the upstream major had told the petroleum ministry that it wanted to rope in British Gas for the three blocks in the K-G basin and British Petroleum for the block in the Kutch region in Gujarat.

"The case of British Gas was even recommended by the UK government. The Prime Minister's Office too wrote to the petroleum minister asking him to reconsider the decision. However, he is unlikely to renew ONGC's licence," said a source in the petroleum ministry.

When contacted, ONGC Chairman and Managing Director R S Sharma said: "We did apply to the petroleum ministry for collaborating with British Gas for the blocks in the K-G basin. The ministry has not yet got back to us."

Data from the Directorate General of Hydrocarbons (DGH) show that ONGC had returned another four exploration blocks to the government before, for failing to make hydrocarbon discoveries.

"This had prompted the DGH to recommend that 12 deepwater blocks not be awarded to ONGC under NELP VI," a ministry official said.

The DGH had, in September this year, also recommended penalties of $107.39 million on ONGC and $26.54 million on Reliance Industries for default on commitments made by them on oil and gas exploration blocks awarded under NELP.

In the beginning of December, when Petroleum Minister Murli Deora was considering the proposal from ONGC, there were expectations from all quarters that it would be accepted.

However, Deora is believed to have considered the work done so far on the blocks too less and the time to the expiry of the license for the blocks too little.

"The clincher was a recommendation by the DGH," a petroleum ministry official said. The blocks will continue to be with ONGC till the expiry of the licence in July 2007.