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Rediff.com  » Business » ONGC, OilIndia to hog new licences

ONGC, OilIndia to hog new licences

September 19, 2006 02:37 IST

Government-owned oil companies are expected to walk away with the largest chunk of the 55 oil and gas prospecting licences put up for auction last week, according to a preliminary analysis of the bids.

Oil and Natural Gas Corporation could bag 18-24 blocks, followed by OilIndia with 7-10 blocks. Private sector refining and petrochemicals major Reliance Industries is likely to get 5-6 blocks while Essar Oil could end up with 2-3 blocks, according to numbers crunched by various analysts.

Reliance Natural Resources, Focus, Petrogas GSPC, Prize Petroleum and Cairn are expected to get one block each.

Australia's Santos is also said to be leading in one of the blocks. Government sources confirmed these trends.

"The competition this time was intense, with ONGC and OilIndia's bid for profit petroleum being as high as 90 per cent, and cost recoveries of around 30-40 per cent. Private companies like the Reliance-Anil Dhirubhai Ambani Group's Reliance Natural Resources, despite being aggressive in bidding coal-bed methane blocks, found it difficult to match this. Even Reliance Industries is expected to bag only a few blocks," Yogesh Garg, an independent consultant, said.

While independent analysts pegged ONGC's success at 17-18 blocks, a senior ONGC executive said, "According to our initial estimates, we should get at least 24 of the blocks on offer, if not more."

Of these, six are solo bids, four deepwater, one shallow off-shore and two on-shore.

Of the 5-6 blocks Reliance Industries is likely to get, some would be deepwater blocks, which were the most difficult and involved large investments, analysts said.

"Given the importance attached to deepwater exploration in the past, we would not be surprised to see the bulk of such blocks going to ONGC and Reliance Industries. However, we do not expect these bids to affect the companies' stock prices at the moment, as the developments are far into the future," Shriram Iyer, executive vice-president, Edelweiss Capital, said.

Of the 24 deepwater blocks on offer in the current round, three did not receive any bid.

OilIndia is said to be leading in seven of the on-shore blocks. "OilIndia may be a small company, but they have the capability and the expertise with on-shore wells, so it is only logical for them to step into the market in a big way," an analyst said on the condition of anonymity.

Overseas oil companies may land up with only a few of the smaller blocks, given the aggressive bidding by local players, especially the public sector oil companies.

Public sector oil companies, they pointed out, have been aggressive on several of the bid criteria such as recovery cost and petroleum sharing, as well as the minimum work programme.

For instance, some of the public sector companies have pledged as much as Rs 4,000 crore on the minimum work programme, against the private sector and overseas players' average pledge of Rs 1,000 crore.

On the cost recovery front, too, some of the public sector oil companies have pledged up to 30-40 per cent, while profit petroleum was pledged as high as 90 per cent by ONGC and OilIndia, analysts said.

Gayatri Ramanathan in Mumbai
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