India’s Oil and Natural Gas Corporation (ONGC)  will soon auction more than 60 of its small and marginal fields to private companies, according to several media reports. These fields contribute only 5 percent to ONGC’s total production, while 95 percent of its production comes from 60 large fields.

The marginal fields are usually considered uneconomical for development at the government-imposed price of $3.69 per million British thermal units between the period April and September 2019. ONGC’s fields will be auctioned under the production enhancement contracts (PEC) mechanism. Under PEC, private companies invest in technologies that will improve the production levels, while the fields’ ownership still remains with ONGC.

In January 2019, the government encouraged state-owned explorers to bring in the private sector to enhance production by finding methods to exploit its hydrocarbon resources and reduce dependence on foreign oil, the media reports said.

One of the sources close to the development said, “Global advisory services firm KPMG has received the mandate to run the PEC process for ONGC.

“PEC is a priority as the government is attributing an enormous amount of importance to it. Besides, stagnating domestic production of oil and gas is a major concern. So, as a consequence of that, ONGC has decided to offer its hydrocarbon blocks to other explorers.”

In the first quarter of 2019, ONGC’s net profit dropped the most in the 13 quarters because of low crude oil prices and high costs. That said, its net profit slumped 51 percent in the same period.

Another source close to the matter said, “While the terms of the condition of the PEC are still being worked out, ONGC is looking at something that is more holistic than what it has attempted in the past.”