ONGC Looking At Strategic Partnership With Shell

The Indian petroleum sector is soon going to see another major strategic alliance, with oil & natural gas major ONGC looking to form an alliance with Anglo–Dutch multinational Royal Dutch Shell for upstream and downstream operations. ONGC is now in a serious discussion with Shell to partner in its Indian operations, majorly in exploration and production (E&P) as well as refining. A senior official of ONGC informed DSIJ that some time ago Shell had shown keen interest in some kind of alliance with the company, and officials on both sides have had a series of talks since then.

On the quantum and timing of the deal, the official commented, “It is difficult to state the exact quantum, but it will certainly be a huge deal where we take Shell as our strategic partner on a case-to-case basis on various project, particularly in E&P of oil & gas, deep water exploration and also refining.”

It is important to mention here that private sector biggie RIL already has global oil major BP as its strategic partner, and with Shell coming to India, the Indian energy sector would certainly be booming. If this deal is finalised, it will mark the re-entry of Shell in India after a gap of 16 years, following the sale of its Rajasthan’s assets to Cairn. With regard to the timing of the deal, the official said, “As talks are still going on, this will take some weeks to get finalised”.

In line with the recent recommendations of the Dr Rangarajan Committee, this is certainly an important development. The committee has proposed an increase in gas prices to bring them somewhat in line with those in the global markets from the current USD 4.2 per unit.

If the recommendations are accepted, gas prices in the country would shoot up to anywhere between USD 8.50-9 per unit, providing a major thrust to the revenues of companies like ONGC, RIL, OIL, Cairn and GSPC. “Though some ministries have raised a voice against the proposal, gas prices are bound to go up to make them equitable with global prices as the current price regime will be over next year. As ONGC’s gas is under the Administered Price Mechanism (APM) price regime, if there is an increase in the price of gas, it will certainly be of great benefit to our profits,” adds the official.

Experts believe that it is because of these proposals to increase gas price, global giants are keen to come to India as the revenues would certainly spurt up in the future. In case of ONGC, it is certainly in great need of a company like Shell, which can lend it much-needed expertise in deep drilling and other complex E&P processes. So, it’s a win-win for both the companies.

Considering that India is one of the fastest growing economies, its demand for fuel would double in the next 10 years. Surely, the energy sector in the country will see many more such alliances in the future.