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Rediff.com  » Business » BG eyes stake in ONGC oil blocks

BG eyes stake in ONGC oil blocks

February 11, 2008 15:00 IST

BG Group of the UK is keen on picking 25-30 per cent stake in state-run Oil and Natural Gas Corp's Krishna Godavari and Mahanadi basin deepsea oil and gas exploration blocks off the east coast.

BG has expressed interest to take 30 per cent in KG basin Block KG-DWN-98/4, which ONGC had won in the first round of auction under New Exploration Licensing Policy and 25 per cent in Mahanadi basin Block MN-DWN-2002/2 that the state-run firm had won in NELP-IV.

"We have approached the government for approval of the farm-in," a company official said. If the deal happens, cost of exploration and production would be shared between ONGC and BG in the ratio of their participating interest, while BG would also share the past exploration cost incurred by ONGC in proportion to its shareholding.

For Block KG-DWN-98/4 that sits next to Reliance Industries' gas rich KG-DWN-98/3 or KG-D6 block, BG would bear ONGC's share of forward exploration expenditure to the extent of $ 15 million.

Past exploration costs for Block KG-DWN-98/4 would be paid by BG on declaration of commerciality, while the same for Block MN-DWN-2002/2 would be paid on approval of stake buy by the government, the official said.

Besides, discovery bonus at a rate of one dollar per barrel of oil in case of oil find and 0.50 dollars per barrel of oil equivalent for gas discovery would be paid by BG on its share of recoverable reserves on commencement of commercial production.

Previously, BG had wanted to farm-into ONGC's three pre-NELP blocks but the proposal was turned down by the Petroleum Ministry.

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