ONGC in talks to buy Adani-Welspun stake off Mumbai

State-owned energy explorer Oil and Natural Gas Corp. Ltd (ONGC) is reported to be in talks with Adani-Welspun Exploration Ltd to buy a stake in the latter's oil block in the western offshore region off the coast of Mumbai.

ONGC is in advanced talks to either partner with or completely buy out block MB-OSN-2005/2 held by Adani-Welspun since 2005, according to a report in Mint. A deal could be signed before the end of the current fiscal, its sources said.

A pact between the two firms will help ONGC establish continuity among three of its other blocks located in the same region and develop these blocks using common infrastructure. It will also help Adani-Welspun monetize reserves in the block, which it has held for almost a decade now.

ONGC has three blocks in proximity of the block held by Adani-Welspun, which the company won in the eighth round of New Exploration Licensing Policy (NELP).

While ONGC has established presence of crude oil in the block, its development for production is yet to start.

''If we are able to farm-in (buy a stake) into the block, it will be easier for us to develop the blocks held by ONGC as Adani-Welspun's block lies between two of our Mumbai offshore blocks,'' said an ONGC official who declined to be identified.

Talks are at an advanced stage and Adani-Welspun is keen to monetize the block at the earliest, the official said. Adani-Welspun has two on-land exploration blocks - Cambay Basin in Gujarat and Assam-Arakan Basin in Assam - apart from the block in the Mumbai offshore.

Another official said Adani-Welspun prefers to offload a partial stake than sell off the block. Both officials declined to comment on valuations. Adani-Welspun and ONGC did not respond to queries.

The move to buy into the Adani-Welspun block is a part of ONGC's long-term plan to make Western Offshore its production hub. ONGC currently has three major mid-sea assets off the west coast: Mumbai High, India's largest oil field; Bassein and satellite fields, which produce gas; and Neelam and Heera fields, which produce both.

The Mumbai High asset is India's biggest oil field producing 210,000 barrels of oil per day (bopd), while Bassein and satellites is India's biggest natural gas producing field producing 24 million metric standard cu. m per day (mmscmd) of gas.