ONGC, Shell may enter into a JV to bid for overseas assets

India’s state-run Oil and Natural Gas Corp. (ONGC) and energy major Shell are exploring the possibility of a strategic alliance to jointly bid for global oil and gas assets, following up on their partnership discussions in India’s upstream and downstream sectors, company sources said. ONGC has been actively looking for partnerships with international firms.
Since 2012, it has signed memoranda of understanding with ConocoPhillips for cooperation in shale gas and deepwater exploration in eastern India and with Inpex Corp., Japan’s largest oil company, for a strategic partnership to explore hydrocarbons in the KG Basin.
Shell and ONGC had previously signed an MoU in 2006, “to examine significant opportunities for future cooperation, both in India and other regions across the world.” The MoU covered exploration and production, coal gasification, natural gas, oil products and refining and petrochemicals. However, this plan did not go forward since Shell wanted to invest in some of ONGC’s fields, which the state firm could not allow as it would require cabinet approval, a former top official at ONGC said.
Now, industry sources say both the companies are keen to align in exploration and production, distribution and marketing petroleum products and setting up a refinery. “Yes, now that ONGC and Shell are planning to come together locally, both companies are also exploring the possibility of forming a strategic alliance which entails jointly bidding for global energy assets,” a senior company executive said.
In April 2013, both Shell and ONGC had said they were keen to come together to explore both upstream and downstream opportunities domestically. Such an alliance would mark Shell’s return to the Indian E&P sector after selling its 50% stake in the prolific Barmer block in Rajasthan to Cairn India for US$7.5 million.
Shell already has 70 fuel retail outlets across the country while ONGC has the license to operate 1,100 fuel retail outlets, but currently it only operates one in Mangalore.
Experts say if Shell and ONGC forge an alliance in India and abroad, it would help ONGC develop a strong foothold in the gas business. ONGC is keen to enter the liquefied natural gas (LNG) business, while Shell and France’s Total already operate a 3.5 million ton LNG terminal at Dahej, Gujarat. ONGC, Japanese energy firm Mitsui and BPCL have also signed a pact to study the feasibility of setting up a US$500-750-million LNG import terminal at Mangalore.
The terminal will have an initial capacity of 2-3 million tons, which can be expanded to 5 million tons later.
(May 11, 2013)