ONGC is outsourcing to smaller companies service contracts on marginal fields since it does not have the necessary technology to unlock hydrocarbons in marginal fields, which are typically uneconomical on a standalone basis.
India's Petroleum Ministry has asked ONGC to review its existing mechanism for developing marginal fields as it looks to secure more attractive packages for its service contractors, according to local media reports.
Under the current dispensation, ONGC finds it tough to attract bidders, as the financial package offered to the service contractors is not sufficiently attractive.
"Besides, keeping in mind the element of government subsidy, the company has also to provide for surcharges and royalty from these fields," a market source was cited as saying by the Financial Times. "There is also a cap of $35 per barrel on the pricing of crude oil drawn from these fields. In other words, whatever be the ruling international crude prices, the price of oil produced from marginal fields cannot be above $35 per barrel. Obviously, this makes the offer not very attractive for prospective bidders, as all development cost has to be borne by the contractor."
Marginal fields have low oil and gas reserves that are only economically viable when produced with low capital cost and overheads. With the changing world oil price scenario, innovative technologies and liberal government regulations, the development of marginal fields has assumed importance for increasing production and profit.
LUKoil to supply TGK-8 with gas from Caspian fields
LUKoil, Russia’s largest oil company, plans to supply generating company TGK-8 with gas produced at Caspian offshore fields, Leonid Fedun, vice president of LUKoil, told Interfax.
Fedun is the chairman of the board of directors at IFD Kapital, which has purchased the TGK-8 state stake and supplementary share issue.
LUKoil plans a modernization for TGK-8 that will make it "the most up-to-date electric and heat company, particularly as it is located in a strategically important region for LUKoil," Fedun said. "First and foremost I have in mind utilization of the gas we will begin to produce in the Caspian from 2010."
"Electricity generation is always a separate business, but for us power generation is very important, and particularly for selling gas, which has periodically been a problem for us," he said. “For example, last summer Gazprom refused to accept major gas volumes from us. Therefore we need to have our own source of consumption.”
LUKoil will supply nearly 6 billion cubic meters of gas annually prior to completion of the modernization. When it is finished, gas consumption will rise to 8 billion to 10 billion cubic meters. The electricity plants will also utilize LUKoil's associated gas, he said.
Uzbekistan, Turkmenistan eager about pipeline
Leaders of Uzbekistan and Turkmenistan are keen about opportunities for constructing a new Caspian pipeline.
The two sides met in Ashgabat to express confidence that "all opportunities exist for the successful implementation of the accord reached last May between Uzbekistan, Turkmenistan, Russia and Kazakhstan to build a new Caspian gas pipeline and upgrade the available oil and gas pipelines from Central Asia to Russia," the national news agency UzA reported on Friday.
Uzbek President Islam Karimov and Turkmen President Gurbanguly Berdymukhammedov said jointly: "The Caspian pipeline will provide for an opportunity to double the amount of gas supplied from Central Asia to Russia" and noted "considerable opportunities for developing infrastructure, and fruitful contacts in the spheres of tourism and environmental protection during the implementation of the project."
The Uzbek leaders reiterated Uzbekistan's support of the project to build the Turkmenistan-China pipeline, which will partly run through the Uzbek territory.
"It will help expand exports directions for Uzbek gas, along with an increase in the transit potential of our country," he said.
Closing oil prices, Oct. 19, 3 p.m. London
Brent crude oil: $83.86
West Texas Intermediate crude oil: $87.26