ONGC rescinds pacts with Schlumberger, Halliburton

State-run ONGC has rescinded the initial pacts for outsourcing production from its ageing fields in Gujarat and Assam to international service providers Schlumberger and Halliburton after the oil ministry objected to the contract being handed over without bidding.
Oil and Natural Gas Corp (ONGC) had on December 7 last year signed Summary of Understanding (SoU) to give its Kalol field in Gujarat to Halliburton and Geleki field in Assam to Schlumberger to help in raising production above the current baseline output.
Though the agreements were signed in presence of Oil Minister Dharmendra Pradhan during the bi-annual Petrotech Conference, the ministry felt it was not proper to give away such contracts on nomination basis, sources privy to the development said.

The ministry in no uncertain terms told ONGC that such nomination contracts will not be acceptable, they said.
The ONGC board, which had approved the MoU, thereafter too took a similar and cancelled the SoUs, they said.
The company last week invited expression of interest (EoI) from service providers for undertaking production enhancement from its mature oil and gas fields.

The 15-year Production Enhancement Contract (PEC) will require the oilfield service producer to commit to invest in capital expenditure and operating expenditure to increase production form the existing 'baseline' output.
"The remuneration model will be a tariff which is to be paid in USD per barrel of oil and USD per million British thermal unit for gas for any 'incremental' hydrocarbon produced and saved over the baseline," the EoI said. "Baseline shall be prepared by ONGC and vetted and certified by a third party of international repute."

All the oil and gas produced will belong to ONGC and the service provider arrangement is being entered into to get the best technology available, sources said.
Under the terms of SoUs signed in December last year, Schlumberger and Halliburton were to invest capital and share technical expertise in the two stagnant but producing oilfields.
If they are able to increase output, they were to be paid a pre-determined fee on each additional barrel of crude oil produced.
Besides Schlumberger and Halliburton, ONGC was also in talks with Weatherford International and Baker Hughes Inc for similar arrangement for other fields.

But after the oil ministry disapproval, all such deals are off and all such contracts will be entered only when a service provider offers the highest increase in output in a competitive bidding, sources said.