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Lloyds List: Shell Exploration offers partner a business model on profit-sharing

Published: Oct 10, 2006

SHELL Exploration Company has offered India’s state-owned Oil ‘ Natural Gas Corp a profit-sharing business model for productivity improvements in their exploration and production activities joint venture, writes Shirish Nadkarni in Mumbai.

ONGC is understood to be considering the Shell subsidiary’s proposal, based on a framework outlined by the energy major. The two companies have been holding high-level discussions on the issue.

It would appear that ONGC was not open to going beyond government prescribed norms on making joint investments and yielding operatorship of fields.

However, the Indian company has conceded that it is ready to share with Shell any enhancement made on the planned profit of a field.

The steering committee set up by the two entities to manage co-operation between the companies, following a memorandum of understanding agreed between the oil sector behemoths, is looking into these aspects to open the way to a possible participation in overseas projects as well as domestic ventures.

Earlier this year, ONGC and SEC signed a memorandum of understanding to examine significant opportunities for future co-operation in both India and other countries.

The agreement covered wide areas of co-operation across the full range of upstream and downstream activities including exploration and production, coal gasification, natural gas, oil products, refining and petrochemicals.

The areas of co-operation in the upstream sector included investigation of increasing and enhancing production from existing producing fields in the country and joint bidding in exploration acreage rounds in India.

The co-operation also includes farming into existing but undeveloped Indian exploration blocks, investi gation of opportunities for joint participation in inter- national upstream ventures from Shell’s and ONGC’s portfolios and evaluation of a joint project for coal gasification facilities in the country.

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