ONGC to float SPV for Nagaland project

The state-owned Oil and Natural Gas Corporation (ONGC) has agreed in principle to float its first special purpose vehicle (SPV) for domestic oil exploration to soothe the feelings of the people of Nagaland and ensure that some benefits of oil extraction went to the local population

The SPV will be in form of a joint venture between ONGC and the Nagaland government for oil exploration in the state, which is negotiating a peace with rebels after years of bloodbath.

ONGC currently has only one SPV, ONGC Videsh, for overseas exploration venture. All domestic operations are carried out by the company directly under basins.

The Nagaland government will get a stake in the oil exploration and extraction activities in the state. ONGC secured around 16,000 square kilometre for exploration in Nagaland under NELP 3 and NELP 4.

However, oil exploration activities are yet to start following disputes over land ownership and the demand for additional royalty from the state government.

Subir Raha, chairman and managing director of ONGC, said, "The Nagaland government had requested ONGC to float a separate outfit for exploration in the state. ONGC agreed in principle."

Raha said details of the joint venture are yet to be worked out and exploration in Nagaland would start as soon as the state government sent a formal response.

Sources said the Nagaland government is likely to hold its stake in the proposed SPV through Nagaland Mineral Development Corporation (NMDC) to the extent of 10-15 per cent stake.

Oil exploration and production by ONGC in Nagaland was stalled as villagers objected though exploration in Champai block had been on since 1995.

ONGC pulled out in 1997 owing to security and land ownership issues. Nagaland is a tribal state and so land and resources are owned by the people of the state and not by the Union government.

ONGC acquired 5,000 square km of land for use as oil blocks in Nagaland under NELP-III.

Sources said ONGC would accommodate NMDC in all NELP-III blocks except a few nomination blocks allotted to ONGC directly by the Centre. "There is a technical problem in nomination blocks as far as picking up stake is concerned," sources said.