New Delhi: In what may further discourage foreign companies exploring India’s hydrocarbon blocks, Italian energy firm Eni SpA’s Rajasthan block has run into trouble as one-third of it falls under a protected area classified as a “desert forest”.
The block was among the first Indian exploration contract awarded to Eni. The RJ-ONN-2003/1 block, won in the fifth round of India’s New Exploration and Licensing Policy (Nelp) in 2005, is still awaiting approval from the ministry of environment and forests (MoEF), preventing Eni from going forward with development activities.
“Eni’s first priority was Rajasthan as it is also present in Pakistan and had bid for the block for the complete understanding of the basin. Due to environmental issues with the block, they are very worried,” said a person aware of the issue, but who didn’t want to be identified.
The block lies around 500km from Jaipur and is spread over 1,335 sq. km. Eni is the operator in the block with a 34% stake. The other partners are state-owned Oil and Natural Gas Corp. Ltd with a 36% stake, and Cairn India Ltd, which holds the rest of the stake.
“The matter is stuck with MoEF. Whatever help is needed from us, we will provide it,” said a petroleum ministry official, who requested anonymity.
MoEF officials could not be immediately contacted. An Eni spokesperson declined comment. Questions emailed to Eni’s India office remained unanswered.
Nelp was approved by the government in 1997 and operationalized in January 1999 to boost hydrocarbon exploration in the country. Under the programme, the government allocates the rights to explore blocks through a bidding process, but the projects require clearance from several ministries, including the environment ministry.
India’s ninth round of Nelp auctions in March received a muted response as foreign investors were spooked by frequent revisions in government policy. While one block failed to elicit a bid, 33 blocks received a total of 74 bids, the bulk of which were from state-controlled oil companies. India is concerned about energy security, given that it imports 80% of its annual consumption. By 2030, the country may import as much as 90%?of?its?energy needs.
This is not the first time Eni is facing problems in India. Plans for its block in the Andaman and Nicobar Islands are stuck in the absence of permission to drill from the department of space as the block is close to the rocket-stage impact zone of the Indian Space Research Organisation. The Indian government now plans to suspend contractual obligations for the block, as Mint reported on 29 June.
“The company was betting on the Rajasthan block as it understands the geology of the region. The geological seams are the same,” said the first person cited above.
According to information on Eni’s website, the explorer has 21 exploration and production permits in Pakistan and produced 58,000 barrels of oil-equivalent per day in 2009 from the country.
So far, Nelp rounds have generated 87 oil and gas discoveries in 26 exploration blocks with hydrocarbon reserves of at least 642 million tonnes of crude oil-equivalent. The total committed investment in the Nelp rounds for exploration is around $11.1 billion (Rs.49,506 crore today); so far $14.3 billion has been spent under the programme.