BP wins bid for ONGC's Mumbai High fields; Shell backs out

New Delhi: UK's BP Plc won a bid for ONGC's giant Mumbai High oil and gas field, offering to raise crude oil production by 44 per cent and natural gas by a staggering 89 per cent over a 10-year period, potentially changing the fortunes of the vintage field.

Oil and Natural Gas Corporation (ONGC) in a stock exchange filing said it has selected BP Exploration (Alpha) Ltd, a wholly-owned step-down subsidiary of BP Plc, as the Technical Service Provider (TSP) for raising production in the field.

ONGC had in June last year floated a tender seeking foreign partners to reverse declining output at its flagship Mumbai High fields, offering a share of revenue from incremental production plus a fixed fee but not any equity stake.

BP and Royal Dutch Shell put in an Expression of Interest (EoI) at the close of the tender in September.

Shell, however, did not put in the final price bid, which was to detail the incremental production and the revenue share sought from it. BP was the only firm that put in the bid.

"After the bid evaluation process, BP Exploration (Alpha) Ltd, a wholly-owned step-down subsidiary of BP Plc, UK has been selected as the TSP," ONGC said.

"The TSP will review the field performance and identify improvements in reservoir, facilities and wells to enhance the production from Mumbai High field. The TSP has indicated a substantial increase in oil plus oil equivalent gas production (up to 60 per cent) from baseline production levels (reputed third-party vetted production estimates with natural decline) over a 10 years contract period." BP has two years to show results i.e. raise production over and above the agreed baseline output. Officials, however, said BP has expressed confidence to start delivering results in the next six months.

The field currently produces around 1,32,265 barrels of oil per day and around 13 billion cubic metres of gas (less than 10 million standard cubic metres per day or mmscmd).

This output was projected to decline to about 75,000 bpd of oil and less than 4.5 mmscmd of gas by 2037-38.

BP, which will earn an undisclosed fee denominated as a percentage of revenue accrued after deducting capital and operating expenditure are deducted from income earned from incremental production, has offered help to raise this output by 44 per cent for oil and 89 per cent for gas, officials said adding cumulatively the incremental volumes would be 60 per cent of oil and oil equivalent gas.

For a country that is more than 85 per cent dependent on imports to meet its needs for crude oil, which is turned into fuels like petrol and diesel in refineries, and about half of its requirement of natural gas, that is used to produce electricity, make fertiliser and turned into CNG for running automobiles and piped to household kitchens for cooking, the BP deal holds good promise.

BP in a statement confirmed that it has been selected as the TSP for the project to enhance Mumbai High production.

"We are delighted to have been selected by ONGC as the technical services provider for Mumbai High. We look forward to bringing out long experience of optimising performance and recovery from major mature fields around the world to help unlock and enhance production from Mumbai High, India's largest oil and gas field," said William Lin, EVP Gas and Low Carbon Energy, BP.

Lin said, looks forward to working with ONGC "to create value for both the country and the companies involved, and supporting India's increasing energy needs." BP entered the Indian oil and gas exploration and production (E&P) sector with a partnership with Reliance Industries Ltd 2011. The two had an exclusivity pact for 10 years but continue to work with each other.

For the ONGC tender, BP bid alone.

BP and Reliance produce about 30 mmscmd of gas from KG-D6 block in Bay of Bengal and operate 1,848 petrol pumps and 31 aviation fuelling stations.

ONGC said it had issued an International Competitive Bidding (ICB) tender on June 1, 2024, to engage a TSP for Mumbai High Field with expertise in managing complex mature reservoirs and implementing advanced recovery technologies and best operational practices.

Through this ICB tender, the company invited bids from international operators with proven technical expertise, financial strength, and a track record in similar projects.

ONGC sought bids from firms with annual revenue of at least USD 75 billion, according to the tender document.

The pre-qualification criteria made less than a dozen firms eligible for bidding.

The TSP would have to do a comprehensive review of the field performance and identify improvements as well as implement suitable technological interventions and practices for improving production and recovery, it said.

Bidders were asked to quote quarterly incremental production they can enable over the 10-year contract period as well as the percentage share of the revenue they want from the sale of oil and gas produced over and above the baseline production.

ONGC did not disclose the bid details.

The TSP, which was selected on the basis of one offering the highest incremental production and the lowest revenue share, will also be paid a fixed service fee for its efforts, the document said.

The Mumbai High field (previously Bombay High field) - India's most prolific oil field - lies some 160-kilometre in the Arabian Sea off the Mumbai coast. It was discovered in February 1974 and started production on May 21, 1976.

The field hit a peak of 4,76,000 barrels of oil per day and 28 billion cubic metres of gas in 1989 and has since seen a gradual decline in output.

Its current output makes up for almost 38 per cent of India's production and 14 per cent of consumption.

ONGC believes the field still has a balance reserve of 80 million tonnes (610 million barrels) of oil and over 40 bcm of gas and hence needs partners who can help tap them.

The firm spent Rs 46,315.32 crore since 2000 in various redevelopment plans in order to arrest the natural decline that sets in an ageing and mature field.

With the field seeing a steady decline in output, a stake sale had been considered on at least two occasions in recent years.

A high-level committee headed by the then Niti Aayog Vice Chairman Rajiv Kumar in late 2018 considered "transferring" western offshore oil and gas fields of Mumbai High as also some fields in Mumbai offshore, Assam, Rajasthan, and Gujarat to private/foreign companies.

But that plan met with strong opposition from ONGC.

The oil ministry twice in 2021 told ONGC to give away 60 per cent stake, plus operating control of Mumbai High and Bassein fields to foreign companies.

Bassein and Satellite (B&S), adjoining Mumbai High, are India's biggest gas fields that were put to production in 1988.

The 2021 proposal, too, was resisted by ONGC but with the output continuing to decline it has now come up with the TSP model to get technical knowhow for boosting output.

ONGC produced a total of 18.4 million tonnes of crude oil in 2023-24 (April 2023 to March 2024) fiscal year, down from 18.54 million tonnes in the previous year. Gas output declined 3.2 per cent to 19.974 bcm.