ONGC to fast track alliances

BS SPECIAL

The progress in various high-profile alliances that Oil and Natural Gas Corporation (ONGC), the country's largest exploration and production company, has been tardy so far. This is likely to change with the appointment of R S Sharma as the full-time chairman and managing director.

"When I had only a restricted mandate as the chairman of the company, I could not really push the agreements we have with Shell and the Hindujas," said Sharma, who took over as the full-time head of the company last month after almost 19 months as the caretaker chairman. "With my full-time mandate, I will be pursuing the agreements with more vigour," Sharma added.

ONGC and Shell had entered into a memorandum of understanding (MoU) in January 2006 for cooperation all along the hyrdocarbon chain, including exploration and production, technology-sharing and coal gassification.

However, the MoU has not resulted in any concrete agreement so far. In fact, when Shell wanted to pick up stake in an ONGC block in India last year in return for offshore technology, the two parties could not come to an agreement. ONGC rejected the Shell offer, saying they would only want the technology.

"All MoUs do not result in commercial agreements. We have, in fact, identified a few common areas to work in," Sharma said, referring to technology-sharing in surface coal gassification, for which the two companies have identified coal blocks in Andhra Pradesh.

A senior Shell executive said that although it was true that the agreement with ONGC was moving slowly, there had been a few successes.

This includes Shell agreeing to give ONGC Videsh Limited (OVL) a 15 per cent stake in its BC-10 block in Brazil, for which it had the right of first refusal after Exxon exited the project. Shell also accommodated OVL in a block in Egypt recently.

At the time of signing the MoU, ONGC's then chairman Subir Raha had said that the company might pick up stake in the Shell-operated Sakhalin-II project in Russia. However, that did not fructify.

Vikram Mehta, the chairman of the Shell group of companies in India, had also said then that the Dutch company would enter the exploration sector in the country through ONGC. That too has not happened, with Sharma saying the two are not likely to bid for the blocks jointly under the next round of auction (NELP-VII).

"Now that ONGC has got a full-time chairman, things should move faster," the Shell executive said.

Another MoU signed with the Hindujas in November last year has also not borne any fruit. "The Hinduja tie-up was because they said they could source LNG for us from West Asia. However, we have not yet been able to tie up any LNG source for our proposed LNG terminal in Mangalore," a senior ONGC executive said. Sharma, however, said discussions with the Hinduajs were on.

The older partnership with L N Mittal has also seen its ups and downs. The joint venture company, ONGC Mittal Energy (OMEL), has picked up a couple of oil blocks in Nigeria.

However, the acquisition of a stake in a Kazakhstan block by Mittal alone was a sore point with ONGC. However, Mittal said his asset in Kazakhstan would be transferred to OMEL according to the understanding between the two companies.

Though ONGC executives are doubtful of his commitment, a soft-spoken Sharma may turn the tide in favour of ONGC.

THE DEAL STREET

Shell (January 2006)

OVL has bought 15% stake in Brazil block

OVL has 33% stake in Egypt block

Technology sharing for surface coal gassification

No agreement yet on domestic exploration business

Hindujas (November 2006)

No LNG sourcing yet "� the mandate of the MoU

LN Mittal group (July 2005)

OMEL bags two block in Nigeria

Mittal buys stake in Kazakhstan block alone, outside the agreement

Petrobras (September 2006)

ONGC to get 25-30% stake in three blocks in Brazil

Petrobras to get 15-40% stake in three blocks in India