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Moneycontrol.com: ONGC re-negotiating ties with Shell

3 August 2006
 
Oil and Natural Gas Corporation (ONGC) is re-negotiating its broad-spectrum collaboration understanding with Royal Dutch Shell. The negotiation will decide the fate of Shell’s proposed participation in setting up high-grade bitumen manufacturing capacity, petrochemicals and coal gasification projects.

“We (ONGC) are in a fresh round of negotiation with Shell. We have already met once this month and another meeting is scheduled shortly,” a company official said, adding that the bitumen refinery project was on the agenda of discussion. “We hope we may reach at an early solution,” the official added.

ONGC entered into into an MoU with Exploration Company BV (a subsidiary of Royal Dutch/Shell) in January this year to enable future collaboration along the energy value chain in both upstream and downstream sectors.

On the priority list of proposed projects were joint bidding in CBM-III round, bitumen refinery at MRPL, co-operation in exporting MRPL products and participation in the proposed petrochemicals projects.

While any collaboration between the two would have opened doors for Shell’s entry in the upstream sector in India, the MoU also brightened ONGC’s chances of picking up stake in Shell’s Hazira LNG terminal in India and Shell operated Sakhalin – II oil and gas asset in Russia.

Later developments, however, suggest that both the parties fell out of the understanding. While ONGC went solo in CBM-III, the proposed bitumen refinery project faced a deadlock. Both the parties, however, maintained silence on the state of the collaboration understanding.

Meanwhile, as the crude prices are ruling firm at above the $ 70 level – which was considered as cut-off point by the Union Ministry of Petroleum and Natural Gas while working out a compensation package for the downstream oil PSUs – ONGC is expecting a further rise in its share of subsidies sooner or later.

“It looks like we have to share higher burden than Rs 24,000 initially indicated to us,” an ONGC official said. He, however, maintained that the MoPNG was yet to give any indication on the same.

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