ONGC to take stake in Rajasthan fields

Oil and Natural Gas Corporation (ONGC) will take a 30% stake in Cairn Energy's recent oil discoveries in Rajasthan.

The government has decided to compensate ONGC for the statutory levies like royalty on behalf of the private sector partners in pre-NELP blocks like Cairn's RJ-ON-90/1 block in Rajasthan.

"We have decided to exercise our 'walk-in' right to take 30% participating interest in the Mangala and Aishwariya oil fields of Cairn," ONGC CMD Subir Raha said.

The two fields are expected to produce between 80,000-1,00,000 barrels per day from end of 2007 .

Though the oil finds in Rajasthan are the largest in more than two decades, ONGC had been deterring from exercising its right to take the 30% stake as it would have to pay statutory duties of royalty not just on its own behalf but also on behalf of its private sector partners.

Over the life of the field, ONGC would have paid over $1 billion in royalty - much more than what a 30% share in oil production would have fetched it.

A top government official said the petroleum ministry was moving a cabinet note to compensate ONGC for the royalty it pays on behalf of private contractors of pre-NELP fields.

ONGC paid Rs 229 crore as cess and royalty till September 2004 on behalf of its partners in blocks PY-3 and the Lakshmi field.