Exxon, BP & Shell in Talks with ONGC for KG Basin Deepwater Project

A major step forward for India’s offshore energy sector is the preliminary chats held by ExxonMobil, BP and Shell with Oil and Natural Gas Corporation (ONGC) over partnering in its KG basin project. This action shows that, once again, foreign companies are interested in India’s oil and gas exploration, mainly in difficult and costly deepwater areas.

Delays and underperformance have hit ONGC’s KG-DWN-98/2 block in the east, leaving Cluster 2 as the only currently producing section of the block. The block’s complex geology and capital-intensive nature have driven the public sector to seek technically advanced partners. Discussions are reportedly focused on Cluster 2, the most viable segment in the block.

Key highlights:

• Exxon, BP & Shell in talks to partner with ONGC’s KG Basin project.
• ONGC seeks global expertise to boost output in underperforming Cluster 2.
• High capex demands rule out advisory roles; equity tie-up poses valuation hurdles.

“ExxonMobil, with vast global experience in deepwater drilling, is seen as the most serious contender,” sources familiar with the matter said. The recent visit of Exxon CEO Darren Woods to New Delhi underscores this potential.

Industry experts believe the Mumbai High service contract model won’t suit the KG project due to its high capex demands. “A foreign partner can’t come in just as a technical advisor. It must have skin in the game,” said a person aware of the matter.

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However, equity partnerships come with valuation and regulatory complexities due to ONGC’s state ownership. “Valuation can be questioned now or years later, with multiple state agencies getting involved,” the person added.

ONGC’s KG block, which began production in 2023, remains far below earlier peak output expectations, heightening the urgency for global collaboration.