ONGC, Shell Explore Tie-up to Bid for Global Oil & Gas Assets ; Cos seen keen on joint exploration, production and distribution

State-run Oil and Natural Gas Corp (ONGC) and energy major Shell are exploring the possibility of a strategic tie-up to jointly bid for global oil and gas assets, following up on their discussions for a partnership in India’s upstream and downstream sectors, company sources said.

ONGC has been actively looking for partnerships with international firms. Since last year, it has signed MoUs with ConocoPhillips for co-operation in shale gas and deepwater exploration in eastern India; and Inpex, Japan’s largest oil company, for strategic partnership in exploration of hydrocarbons in the KG Basin. Shell and ONGC had signed a MoU in 2006 “to examine significant opportunities for future co-operation, both in India and other regions across the world”. The MoU covered exploration and production, coal gasification, natural gas, oil products and refining and petrochemicals. However, this did not make progress as Shell wanted to invest in some of ONGC’s fields, which the state firm could not facilitate as it would require Cabinet approval, a former top official at ONGC said. Now, industry sources say both the companies are keen to align in exploration and production, distributing and marketing petroleum products and setting up a refinery. “Yes, now that ONGC and Shell are planning to come together locally, both companies are also exploring the possibility of forming a strategic alliance, which entails jointly bidding for global energy assets,” a senior company executive told ET. “There is a distinct possibility that ONGC and Shell could come together to acquire oil and gas assets abroad, it would be a logical extension to the domestic alliance that the two companies are keen to forge currently, but the talks are in a nascent stage now,” said another senior company executive. Last month, both Shell and ONGC had said they are keen to come together to explore both upstream and downstream opportunities domestically. This has not been finalised. Such an alliance would mark Shell’s return to the Indian E&P sector after selling its 50% stake in the prolific Barmer block in Rajasthan to Cairn India for $7.5 million. The block now produces 175,000 barrels per day and has helped Cairn Plc make billions of dollars from an IPO and then by selling the controlling stake to the Vedanta Group.

Shell already has 70 odd fuel retail outlets across the country while ONGC has the licence to operate 1,100 fuel retail outlets, but currently it only operates one in Mangalore.

 

Source: ET 14/05/13