Given the government’s inability to take tough decisions on privatising PSUs, it is not clear how it plans to take away various performing oil/gas fields from ONGC and give these away on a profit-share to various private oilcos—the one that promises the most output will likely win the bid and get a 60% share in these fields. These fields produce around a fourth of ONGC’s oil and gas output, so logically the PSU’s board has to oppose the move—unless the government can demonstrate to it that the increase in oil/gas will be so much after the fields are given to the private sector that ONGC stands to gain with even a lower equity share in the fields. Of course, given ONGC’s board went along with the government’s suggestion to spend around Rs 33,000 crore to buy its 51% stake in HPCL, getting the board’s approval may not be that tough either.
Considering how ONGC’s production has fallen,it is not surprising the government should feel frustrated—between FY07 and FY17, while ONGC’s gas production rose from 22.4 billion cubic metres (bcm) to 23.3 bcm, its crude oil production fell from 26.1 million tonnes (mt) to 25.5 mt; and this happened while ONGC has increased gas reserves from 540 bcm in FY07 to 788 bcm in FY16 and oil from 561 mt to 578 mt. Before rushing to condemn ONGC, it is important to understand why it has not been able to monetise these new discoveries. Read More…
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