The Hindu Business Line : ONGC-Shell alliance runs into rough weather

New Delhi April 5 The alliance between Royal Dutch Shell and ONGC for development of the latter's Kalol oil field in the western onshore region (Gujarat) seems to have run into rough weather. The two entities have been unable to reach a commercial understanding on the project, as Shell wants to come in as an equity partner, while ONGC is looking for a technical tie-up for enhancing production from the fields.

Speaking to Business Line, a senior ONGC official said, "Shell is keen to come in as a co-investor and not just as a service contractor, which is difficult to do in the developed fields. To work out an equity participation in an exploration block under NELP rounds is easier, as it is through a bidding process and Government permission is there. In pre-NELP or nomination blocks, ONGC has to develop on its own."

Talks with Shell comes at the backdrop of a memorandum of understanding (MoU) inked between ONGC and Shell Exploration Company BV (a subsidiary of Royal Dutch Shell) for wide-ranging co-operation in the hydrocarbons value chain. The MoU between ONGC and Shell for technology co-operation in case of on-field productivity improvements was a general and broad one. There is a more specific MoU, which is to be signed between ONGC and Shell for specific technology applications at Kalol and other oil fields in western onshore region.

Modalities

"We are still trying to work out a mechanism and iron out all the commercial terms," the official said. The two entities have for sometime now been working out modalities on how Shell would participate in the project. ONGC has been wanting to rope in Shell for technical upgradation. The State-owned company has said that a commercial call would be taken on the basis of the percentage of enhanced production the Dutch company is able to get. Kalol is the highest producing field of ONGC's Ahmedabad Asset in western onshore.

Domestic production

To further enhance its domestic production of oil and gas, the company requires better technology, and expertise, which is available with Shell. The average crude production of Kalol field is 1,430 tonnes per day (tpd). The total production from ONGC's marginal assets is 22,000-23,000 tpd.

The field also produces gas. It comprises several producing blocks. ONGC is currently implementing an improved oil recovery (IOR) scheme to augment production in this field, as a part of its IOR/enhanced oil recovery scheme for the company's 15 producing fields.