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UK-based global energy major BP has bagged the contract to operate and enhance production from Oil and Natural Gas Corporation’s (ONGC) flagship Mumbai High field—India’s largest oil and gas field—which has been witnessing a gradual fall in output for over three decades. In June, the state-owned ONGC had sought bids from international oil and gas players to increase production from the field.
BP and Royal Dutch Shell were the only international majors that participated in the tender, which offered the foreign partner a share in revenue from the incremental hydrocarbon production and a fixed fee, but no stake in the field. While Shell had submitted an expression of interest as part of the tender, it did not submit the final bid, making BP the only bidder, it is learnt.
According to ONGC, BP has indicated an increase of up to 60 per cent in oil and oil equivalent gas from the field’s baseline production levels over the 10-year contract period.
“After the bid evaluation process, M/s BP Exploration (Alpha) Ltd., a wholly-owned step-down subsidiary of BP Plc, UK has been selected as the TSP (technical service provider). The TSP will review the field performance & identify improvements in reservoir, facilities and wells to enhance the production from MH (Mumbai High) field,” ONGC said in a filing to the stock exchanges.
“While the Company (ONGC) focuses on unlocking the potential of new hydrocarbon resources through green-field projects, enhancing recovery from mature fields like MH also remains a top priority for increasing domestic production,” ONGC said.
The Indian company added that BP will review the field performance and identify improvements in reservoir, facilities, and wells to enhance its output. ONGC did not share more details—financial or operational—about the contract. As per the tender document, the TSP was to be selected based on incremental production projections and the share of revenue sought.
International players with proven technical expertise and a track record in similar projects, and an annual revenue of at least $75 billion, were eligible to participate in the tender. This condition had limited those eligible to participate in the tender to just a handful of global companies.
“We are delighted to have been selected by ONGC as the technical services provider for Mumbai High. We look forward to bringing our long experience of optimising performance and recovery from major mature fields around the world to help unlock and enhance production from Mumbai High, India’s largest oil & gas field. We look forward to working with ONGC to create value for both the country and the companies involved, and supporting India’s increasing energy needs,” said William Lin, Executive Vice President for Gas and Low Carbon Energy at BP.
The UK-based company also did not divulge the contract’s financial details, like the share of revenue from incremental production that it would be entitled to.
BP is already among the largest international energy companies in India with joint investments with Reliance Industries (RIL) in natural gas production and fuel retail, apart from being present in the country through Castrol lubricants and oil and gas trading.
The Mumbai High field, which lies in India’s Mumbai Offshore basin in the Arabian Sea was discovered in 1974 and hydrocarbon production from the field began in 1976. In 1989, It touched its peak production level of 476,000 barrels per day (bpd) of crude oil and 28 billion cubic meters (bcm) of natural gas. Since then, the production has been sliding gradually.
The field’s current production levels are around 134,000 bpd of crude and 13 bcm of natural gas. The output was expected for further decline substantially over the next 10-15 years, even as ONGC estimates that the field still holds over 600 million barrels of oil and around 40 bcm of natural gas. However, despite its efforts, the company has been unsuccessful in arresting the decline in production and reversing it, and therefore decided to rope in an international partner.
ONGC’s decision to bring on board a TSP for Mumbai High comes in the wake of the government mulling selling stake in the field along with its operatorship to international oil and gas majors in a bid to enhance production. Time and again, such proposals were met with heavy resistance from ONGC, as the company did not want to part with its crown jewel that had demanded decades of effort and billions of dollars in investments. In the TSP model, ONGC will continue to have control of the Mumbai High field.
India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. The is also among the top importers of natural gas globally with an import dependency level of around 50 per cent. Given high dependence on energy imports, the government wants domestic oil and gas production to rise substantially, and has been pushing domestic oil and gas companies in that pursuit.
