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State-run Oil and Natural Gas Corporation's bid to sell stake in its deep water and ultra deep water blocks to US-based ConocoPhillips and Shell Corporation has hit a ministry of defence (MoD) block.
The company has been in talks with ConocoPhillips and Shell for some time. It now says the MoD’s stringent norms on exploration in 'no-go' areas is posing a big challenge in taking the deal forward.
"We are desperately looking for technology partners but the way things work, no international player would want to put in money. While ConocoPhillips is keen on a deal, the specifications of MoD on pursuing exploration in deep water blocks are creating a problem," said a senior ONGC executive, on condition of anonymity.
ONGC began talks with ConocoPhillips last year and was hopeful of finalising the deal during the first half of this year. It holds 19 offshore blocks across the Mahanadi, Cauvery and Krishna-Godavari basins and the Andaman & Nicobar Islands. ONGC has been seeking partners rich in experience and technology for its deep water blocks. Last year, it farmed out a 26 per cent stake in exploration block KG-DWN-2004/6 to Japanese explorer Inpex.
"There is no point selling stake for the sake of it. Later, we would be running from pillar to post, seeking clearances from all authorities involved. Despite the fact that we need experienced international players to help us in exploration, the government refuses to give a clear indication of its policies," the official added.
Nearly 40 blocks, including Reliance Industries’ Krishna-Godavari basin KG-D6 block and the gas discovery area of NEC-25 in the north-east coast region, were declared 'no-go' zones by the MoD, as they were either close to a proposed naval base or to a missile launching area.
The Ministry of Defence is of the view that any exploration and production activities near its naval base would hamper surveillance and detection operations. Nearly 30% of the KG-D6 block overlapped with one of the Navy's firing and exercise areas and was branded a ‘no-go’ zone.
However, this March, the Ministry of Defence cleared 8 blocks, inlcuding RIL's but imposed stringent conditions for exploration of the other 32 blocks.
Bit five blocks bagged by Oil and Natural gas Corporation (ONGC), BG Group of UK and Cairn India, continue to be in the 'no-go’ areas.
ONGC's two KG basin blocks, KG-OSN-2005/1 and KG-OSN-2005/2, fall directly within the boundary of a proposed naval base and its KG-OSN-2009/4 block fell within the range of DRDO's Machhlipatnam launch site and Indian Air Force's Suryalanka guided weapon firing range.
BG’s block KG-DWN-2009/1 fell at the entry of the proposed naval base and hence the Navy could not grant clearance while Cairn's KG-OSN-2009/3 block was in the proximity of the Suryalanka GWFR.
ONGC and ConocoPhillips had last March, signed a memorandum of understanding for cooperation in exploration and development of shale gas resources in India, North America and other geographies.
The memorandum of understanding was also to explore deep water opportunities in the Eastern offshore basin in India.
"In the first phase starting today we will explore Damodar, Cambay, KG and Kaveri basins for Shale gas. It will last six months. Studies would be done for another 19 deep water blocks," Sudhir Vasudeva, Chairman and Managing Director, ONGC had said during signing of the MoU.
Later in November 2012, ONGC's foreign arm ONGC Videsh Ltd, in its biggest acquisition ever, agreed to invest $5 billion to acquire ConocoPhillips' 8.4% stake in the Kashagan field off North Caspian Sea.
