Jan. 5 (Bloomberg) -- Oil & Natural Gas Corp., India’s biggest energy explorer, will take over stakes in two offshore exploration blocks held by BG Group Plc as the British company withdraws from the projects.
The blocks off India’s east coast are in the Krishna Godavari and Mahanadi basins in the Bay of Bengal, ONGC Exploration Director S.V. Rao said yesterday in New Delhi. BG, which retains stakes in a producing venture and an exploration project in the country, will pay ONGC $50 million for failing to fulfill its drilling commitments, he said.
ONGC plans to raise output from aging fields in India and open up new areas as energy demand rises in Asia’s second-fastest growing major economy. The state-owned explorer, which bought Cairn India Ltd.’s 10 percent holding in another block in the Bay of Bengal in December, has about 140 billion rupees ($2.6 billion) in cash, Chairman Sudhir Vasudeva said yesterday.
“The reason we’re taking these stakes is because we see a lot of value,” Vasudeva told reporters in New Delhi. “There’s been a gas discovery in one of these blocks and we see potential for more.”
ONGC rose 1.3 percent to 266.7 rupees in Mumbai trading yesterday before the decision was announced. The stock fell 20 percent in 2011, compared with a 25 percent decline in the benchmark Sensitive Index. BG gained 0.1 percent to 1,429.5 pence in London.
BG, the U.K.’s third-largest natural-gas producer, is withdrawing from the KG-OSN-2004/1 block in the Krishna Godavari basin and the MN-DWN-2002/02 license in Mahanadi. It retains a 30 percent stake in the KG-DWN-2009/1 permit.
“BG Group is not in the process of exiting India,” Mark Todd, a company spokesman, said by e-mail. “As we’ve noted previously, BG Group keeps all of the assets in its global portfolio under review.”
The company said in April 2010 it had withdrawn from a deepwater block in India, KG-DWN-98/4, citing a lack of clear documentation on the validity of a production-sharing contract.
BG has a 30 percent stake in the Panna-Mukta and Tapti fields in the Arabian Sea in partnership with ONGC and Reliance Industries Ltd. It also successfully bid for the MB-DWN-2010/1 license off western India in a 2010 auction, and has yet to be awarded the contract by the government, its website shows.
BG’s interests in India include the supply and distribution of liquefied natural gas. The company agreed in September to sell as much as 2.5 million metric tons of LNG to Gujarat State Petroleum Corp. for 20 years, starting in 2014.
Separately, BG is seeking buyers for its 65 percent stake in Gujarat Gas Co., a utility operating in the west Indian state. It owns a 49.8 percent stake in Mumbai-based Mahanagar Gas Ltd.
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