ONGC In Initial Partnership Talks with ConocoPhillips

NEW DELHI (Dow Jones Newswires), Jan. 17, 2012

Oil & Natural Gas Corp. Tuesday said it is in initial discussions with ConocoPhillips to explore a possible partnership, a deal which could be hugely significant for India's flagship explorer.

ConocoPhillips' expertise could help ONGC arrest a continued slide in production, and bring in much-needed cash to fund its investment plans.

The state-run company didn't provide details of the discussions--which it said are "at a very nascent stage"--but an executive told Dow Jones Newswires that ONGC could sell stakes in some of its blocks in India to ConocoPhillips.

He added that ONGC may buy into some of the U.S. oil major's blocks as well.

"We are expecting a team from ConocoPhillips by next week," the ONGC executive said. "We are considering several options on joint exploration and production in India and overseas."

ConocoPhillips declined to comment saying the company's policy is not to comment on "market speculation."

News of the talks helped ONGC's shares, which hit an intraday high of INR262.80 before finishing the day up 2.05% at INR261.75 in a Bombay Stock Exchange market which ended 1.71% higher.

ONGC, which accounted for 65% of crude oil production and 44% of natural gas output in India in the financial year through March 2011, has been trying for several years to stop a fall in domestic output.

The company's main fields have been in production for decades now, and it hasn't been able to bring any new major field into play.

"A tie-up with ConocoPhillips will help ONGC bring in expertise in exploration, like what BP did for Reliance," said Bhavesh Chauhan, an analyst with Mumbai-based Angel Broking.

Reliance Industries Ltd. last year sold a 30% stake in 21 exploration blocks in India to BP PLC. The deal included the massive D6 block on India's east coast.

The deals were part of Reliance's strategy of utilizing the British energy giant's expertise in deepwater drilling to bolster oil and gas production levels.

Monday, an Indian newspaper reported that ONGC has offered 19 of its deepwater oil and gas exploration blocks to ConocoPhillips for joint exploration, and that the two companies will look at partnerships in shale gas in India, North America and elsewhere.

Earlier in January, ONGC said that the BG Group has exited their partnerships in three blocks in India.

Also, the Press Trust of India reported in April 2010 that Norway's Statoil and Brazil's Petrobras have pulled out of ONGC's deepwater block in the Krishna Godavari basin because of government approval delays.

Copyright (c) 2012 Dow Jones & Company, Inc.


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