ConocoPhillips (COP) and India’s state-owned company Oil & Natural Gas Corp. (“ONGC”) inked an agreement for the exploration of unconventional resources inside and off the east coast of India and in North America.
This latest memorandum of understanding (MoU) enables ConocoPhillips to tap huge shale gas resources in India through its technological expertise. The MoU involves cooperation of both parties in shale gas exploration in India, North America and other regions. ONGC also seeks technological support from ConocoPhillips for deepwater exploration in the Eastern offshore of India and has specified a list of 19 blocks to the company for analysis. The first phase entails data evaluation across Damodar, Cauvery and Krishna-Godavari basins.
ConocoPhillips has immense experience in the exploration and development of shale gas in the U.S, while ONGC lacks proficiency in shale gas, which the Indian government as well as several Indian companies are trying to develop to ease the country’s energy shortage. India fulfils 80% of its crude oil demand from abroad and marks as the world’s fourth-largest oil importer. Indian exploration companies are seeking partnerships with international oil and gas companies for major technological assistance in order to enhance their production levels as well as to expand their geographical footprints.
The company may offer a share to ONGC in its shale gas projects in the U.S. Again, this partnership may end up in ONGC offering a share to ConocoPhillips in the deepwater oil and gas blocks it holds off the eastern coast of India.
The pact will help to improve ONGC’s sluggish production level that experienced a downfall of 6.3% over the four years to 488,400 barrels a day as of March 31, 2011. ONGC – holding 65% of crude-oil production and 44% of natural gas output in India in its financial year ended March 2011 – was unable to bring new fields into play in the past three decades.
The ConocoPhillips-ONGC accord may proof to be one of India’s largest agreements in the oil and gas segment, which experienced a major pact in the recent past. In February last year, Reliance Industries Ltd (“RIL”) sold 30% stake in its 21 oil and gas blocks for $7.2 billion to the British energy behemoth BP Plc (BP).
Houston, Texas-based ConocoPhillips continues to successfully exploit exploration opportunities around the globe. The company occupies the fifth position as the refiner in the world and is the third-largest integrated energy company in the U.S.
We maintain our long-term Neutral recommendation for ConocoPhillips, which currently retains a Zacks #2 Rank (short-term Buy rating).
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