Govt shelves plan to bring FDI into ageing fields of ONGC and OIL

The government has shelved the plan to privatise several old and ageing fields of ONGC and OIL. It has been decided to give one more opportunity to the public sector oil and gas exploration companies to increase production from these depleting fields by bringing in modern technology and stepping up investments.

The decision has been taken after the intervention of the Prime Minister’s Office (PMO), which is of the view that the state-run companies should be encouraged to boost production in their own blocks rather than offering these to private entities on a platter. Earlier, the employees of these two companies had raised strong opposition to the move proposed by the petroleum and natural gas ministry. The oil ministry drew up a detailed plan last year to allow global energy companies to pick up majority stake (up to 60 per cent) in 11 old and ageing fields of ONGC and four of OIL under the production enhancement contract aimed at raising output. The plan also included 44 older fields of ONGC and OIL that could take on private technological partners under a process managed by the government.
But the proposal failed to take off as it immediately raised strong opposition from employees of the two entities that also attracted the attention of PMO.

The employees’ associations in their numerous appeal to the government made it clear that any such move would have everlasting consequences on health and future growth of these valuable and enduring public sector enterprises.

“The policy to invite private players for ageing blocks of ONGC was just being discussed and after consultation the broad view is that the blocks should be left with state-run companies,” said a government source privy to the development.

Disturbed that the proposed move would severely affect the motivation of the employees, ONGC officer’s association had also sought prime minister Narendra Modi’s intervention to stall oil ministry’s plan to sell prized producing assets of the company that would also have highly damaging implications for the country.

In the letter written to the PM, the Association of Scientific & Technical Officers (ASTO) of ONGC cited that privatisation of oil and gas fields has not worked in the past and will not work even now while ONGC would continue to shoulder national energy cause even if means undertaking a commercially unviable exercise in larger national interest.

Giving examples of where privatisation has faltered in the oil and gas sector, the letter had cited the case of falling production at the western offshore Panna/Mukta fields that were privatised in the 1990s and Ratna R series fields, which were awarded to a consortium, led by Essar Oil, way back in 1996.

The fields, discovered and developed by ONGC, were producing at the time of auction and were eventually returned to ONGC after 20 years as Essar contract could not be finalised.

Subhash Narayan