The Indian government is considering a proposal for a swap of oil assets between state Oil and Natural Gas Corporation (ONGC) and Cairn Energy, reported the Financial Express. The Ministry of Petroleum and Natural Gas has submitted a proposal for ONGC to acquire Cairn’s equity in two offshore blocks in the Krishna-Godavari and Cambay basin in exchange for ONGC transferring part of its equity in two onland blocks to the UK-based company. In addition, ONGC may have to pay Cairn US$150 million.

The two deepwater blocks are said to be highly prospective, with recent commercial discoveries having been made by Reliance and ONGC in the adjoining block. The Cambay basin block has proven reserves of 332 billion cubic feet of natural gas and the potential for another 141 bcf.

Cairn Energy Plc UK is an Edinburgh (Scotland) based company with oil and gas operations in India, Bangladesh and the North Sea. In line with its corporate strategy to focus on exploration, Cairn has decided to sell part of its interests in producing assets in India and Bangladesh.

An unidentified petroleum ministry official told the Financial Express said he expected the finance ministry to approve the proposal, clearing the way for the Cabinet committee on economic affairs (CCEA) to consider the final package.

The proposal calls for ONGC to acquire 90% of Cairn’s participating interest in Block KG-DWN-98/2 along with operatorship. ONGC will take over Cairn’s 15% participating interest in the exploratory area and a 10% equity in Block CB-OS/2.

ONGC will also seek to transfer 30% of its stake in two exploration blocks GV-ONN-97/1 (located in the Ganga Valley in Uttar Pradesh) and CB-ONN-2001/1 (located in the land part of Cambay basin in Gujarat) to Cairn.

Of the six wells drilled by Cairn in the KG basin block, five have shown the presence of hydrocarbons. Initial assessment of reserves show that about 26 million barrels of oil and 216 billion cubic feet (bcf) of gas, with further estimated potential of 100 million barrel of oil and one trillion cubic feet (tcf) of gas in discovery area.

CB-OS/2 is a joint venture between Cairn (50%), ONGC (40%) and Tata Petrodyne (10%) in the discovered areas. In the exploration area, Cairn holds 75%, ONGC 10% and TPL 15%. The proposed acquisition of 10% in the discovered areas and 15% in the exploration area would make ONGC the major partner in the block, which can be leveraged for claiming operatorship in future, said the newspaper.

ONGC holds a 70% stake in Block GV-ONN-97/1 with Indian Oil (IOC) the remaining 30%. ONGC holds a 100% equity in CB-ONN-2001/1.

Also see EnergyAsia, August 2003 issue, Cairn Energy: UK firm gains from active exploration focus on India