The government has decided to award the D1offshore oilfield to the Indian Oil Corporation - Oil and Natural Gas Corporation combine on a nomination basis.
Although petroleum minister V K Ramamurthy is said to have approved the award of the oilfield, the decision has not yet been conveyed to the two corporations.
The award of the oilfield, which is located in the Bombay offshore area, will be the first upstream venture of public sector Indian Oil Corporation (IOC), which has hitherto been only an oil refining and marketing company.
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Earlier, IOC had tied up with UK-based Enterprise Oil for the development of the field. It was hoped that in return for this field, Enterprise would offer IOC equity participation in one of the promising blocks awarded to it in third countries.
The two companies had come together on the recommendation of the ministry of petroleum and natural gas that the two oilfields in the Bombay offshore area D1 and D18 be given to IOC and Enterprise Oil on a nomination basis without competitive bidding. While the industry called it a violation of the norms for the award of oilfield development contracts, the ministry reinforced its recommendation with the plea that IOC had to be encouraged to take up upstream activities.
However, it was later realised that by awarding the contract to the IOC-Enterprise combine, the government stood to lose all the profit that should accrue to it. Moreover, ONGC, which had discovered the two fields, could not be allowed to recover its past costs.
To soft-pedal the issue, Enterprise Oil had offered to farm out some of the exploration acreage acquired by it in third countries to IOC on a `swap basis. Enterprise Oil holds some 20-odd exploration licences worldwide.
However, the government finally decided against offering the two oilfields to the combine and asked IOC to tie up with ONGC to bid for these fields. While D1 is estimated to have oil reserves between 50 and 70 million barrels, D18 has estimated reserves of 40 million barrels.