IOC and ONGC Videsh to Bid for South Ghawar Field

Indian Oil Corporation and ONGC Videsh will submit a joint bid for acquiring South Ghawar gas field, one of the largest onshore fields in Saudi Arabia. "They (Saudi Arabia) have invited us in London on July 21 for negotiations for developing the South Ghawar gas field," IOC Chairman M S Ramachandran said.

Saudi Arabia had last month terminated contract with ExxonMobil-led consortium for developing the South Ghawar gas reserves. The ExxonMobil consortium, which also included Shell, BP and ConocoPhilips, was to invest 15 billion dollar in bringing gas to production. The companies wanted access to more gas than the Saudis were offering and the two sides also disagreed over the rate of return for investments in petrochemical, power and desalination plants.

Ramachandran said he had had a round of discussion on getting a stake in South Ghawar field with Saudi Aramco CEO Abdullah S Jumah last month when he had gone to Riyadh for renewing the annual contract for import of crude oil.

ONGC Videsh Ltd, the overseas arm of Oil and Natural Gas Corporation, would have a majority stake in the consortium bidding for South Ghawar field that is estimated to hold 35 trillion cubic feet of gas reserves. "We have indicated to them our interest in taking up the Ghawar gas project and also the associated petrochemicals and power projects," he said. Ramachandran and OVL Managing Director Atul Chandra will hold negotiations with Saudi Arabian national oil firm in London to get a foothold in the Arab country which holds the world's largest oil reserves.

D Ramachandran said IOC is looking at oil exploration and projects in the Middle-East and Africa to expand its oil and gas asset portfolio. The state-run refiner, which also happens to be the sole Indian firm in the Fortune 500 list of global firms, is exploring opportunities in Iran, Kuwait, Sudan, Bangladesh, Qatar, Papua New Guinea and Indonesia. "We are adopting the consortium approach to acquire oil properties abroad. Besides OVL, we are also exploring projects along with Petronas of Malaysia and Premier Oil of UK," he said. "We have expertise in downstream refining and marketing but for exploration and production we need a partner," he said.

Saudi Arabia had picked eight oil companies in June last year to carry out the multi-billion dollar gas projects. Split into three consortiums - two led by ExxonMobil and one by Royal/Dutch Shell - they were tasked with bringing a gas field on stream and to build facilities that will use their production as feedstock for electricity, water desalination and petrochemical plants. ExxonMobil was tasked with developing the South Ghawar field requiring a 15 billion dollar investment, and the Red Sea field, needing 5 billion dollar. Shell was picked to develop Shaybah which requires 5 billion dollar.

The South Ghawar project, located north of the Empty Quarter, includes construction of two electricity and desalination plants as well as two petrochemicals plants in the Eastern Province and Western Province.