Shell and ONGC had signed an MoU in 2006 "to examine significant opportunities for future cooperation, both in India and other regions across the world". The MoU covered exploration and production, coal gasification, natural gas, oil products and refining and petrochemicals. However, this did not make progress as Shell wanted to invest in some of ONGC's fields, which the state firm could not facilitate as it would require Cabinet approval, a former top official at ONGC said. Now, industry sources say both the companies are keen to align in exploration and production, distributing and marketing petroleum products and setting up a refinery. "Yes, now that ONGC and Shell are planning to come together locally, both companies are also exploring the possibility of forming a strategic alliance which entails jointly bidding for global energy assets," a senior company executive told ET.
Last month, both Shell and ONGC had said they are keen to come together to explore both upstream and downstream opportunities domestically. This has not been finalised. Such an alliance would mark Shell's return to the Indian E&P sector after selling its 50% stake in the prolific Barmer block in Rajasthan to Cairn India for $7.5 million. Shell already has 70 odd fuel retail outlets across the country while ONGC has the licence to operate 1,100 fuel retail outlets, but currently it only operates one in Mangalore. "It will take some time for the final contours of the international alliance to emerge clearly, but ONGC definitely stands to gain a lot, given Shell's expertise in the global gas and LNG sector," the executive added.
Experts say in case Shell and ONGC forge a comprehensive in India and abroad, it would help ONGC develop a strong foothold in the gas business. ONGC is keen to enter the liquefied natural gas (LNG) business, while Shell and France's Total already operate a 3.5 million tonne LNG terminal at Dahej, Gujarat. ONGC, Japanese energy firm Mitsui andBPCLBSE 0.60 % have also signed a pact to study the feasibility of setting up a $500-750-million LNG import terminal at Mangalore.
The terminal will have an initial capacity of 2-3 million tonnes, which can be expanded to 5 million tonnes later. "All kinds of global and local linkages are possible, the gas sector being one of them but we still need to finalise things," said the ONGC executive.