NEW DELHI/MUMBAI - India plans to offer stakes of up to 60 percent in oil and gas fields owned by state energy companies that are already under production to private firms, said five government and company sources with knowledge of the matter.
The government is making the decision after failing to draw investment from global oil majors in new fields. The plan would boost India's domestic oil and gas output and would meet Prime Minister Narendra Modi's target to reduce oil imports by 10 percent by 2022. However, the plan could reduce profits of state-owned companies.
India is the world's third-largest crude importer, buying 80 percent of its supplies from overseas.
The sales plan would affect so-called "nomination blocks" or fields handed to state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd. The fields are located both onshore and offshore, according to the sources.
The Directorate General of Hydrocarbon (DGH), a unit of the oil ministry, has suggested these state companies form joint ventures with private firms including foreign majors that have long eyed these fields, the sources said.
India's cabinet could accept the new policy by December, said one of the sources, a government official.
The DGH has also proposed the state-owned companies enact technical tie-ups with private firms, offering to give them an assured rate of return if the output increases beyond a certain level, the five sources said.
The shift in strategy is triggered by the inability of domestic explorers to keep pace with India's rising energy demand.
After the discovery of the Bombay High oil fields in 1974 and Bassein gas fields in 1976, ONGC has not been able to bring any new major fields into production in the last three decades.
India has failed to draw interest from global oil majors in licensing rounds since 1990 even though the fiscal terms were eased. However, Royal Dutch Shell and BP later bought stakes from firms that had won drilling rights.
Another of the sources, an ONGC executive, said the government's move to invite private firms in the mature oil fields will impact their long-term plans.
"We look at the blocks from a long-term basis...internally, the company is not keen on the move as it can disrupt the current planning and production targets over the long term," the executive said, speaking on the condition of anonymity since he was not authorised to speak to journalists.
A third source, also with ONGC, said the company would prefer to share revenue with the new partners for the incremental production but not for the entire output from the fields.
A spokesman for ONGC declined to comment. The DGH Director General Atanu Chakraborty also declined to make a comment.