New Delhi: State-owned Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL) may have to adhere to finite deadlines for work on hydrocarbon blocks awarded to them as the government prepares to crack the whip and enforce strict time schedules.
The move is an attempt to address concerns about the time lag between discovery of and production from so-called nomination blocks—potential oil and gas fields that were awarded without auction to the state-owned hydrocarbon explorers and producers.
The government plans to introduce deadlines on the lines of those set for hydrocarbon blocks awarded through auction under its new exploration licensing policy (Nelp). Well-defined timelines have led to private sector oil companies accelerating production, while the absence of strict deadlines in the case of nomination blocks has led to delays, in turn affecting the country’s energy security.
“In Nelp blocks discovery-to-production timelines are very well defined while in nomination blocks, there are no strict deadlines,” said director general of hydrocarbons (DGH) S.K. Srivastava.
“A lot of things in nomination blocks have not been well defined. Petroleum ministry has already formulated broad guidelines for nomination blocks on the format of Nelp guidelines,” he added. “This is now to be deliberated and implemented.” ONGC and OIL are the two firms that have received nomination blocks from the government and presently have 65 and 39 exploration blocks, respectively.
“The introduction of timelines to nomination blocks akin to the Nelp framework will help level the playing field and provide for a uniform set of guidelines for development of upstream assets,” said Gokul Chaudhri, partner at audit and consulting firm BMR Advisors.
While recoverable crude oil and natural gas reserves in the country are estimated at 736.45 million tonnes and 1,119.55 billion cu. m, respectively, their exploitation isn’t keeping pace with growing demand.
A senior petroleum ministry official who did not want to be identified confirmed the existence of the proposal. “We have heard about the proposal, but nothing beyond that,” said N.M. Borah, chairman and managing director of OIL.
ONGC chairman and managing director R.S. Sharma said he didn’t think there was a need to put in place a policy to implement Nelp-style deadlines for nomination plans; administrative instructions would suffice, he said.
Offshore discoveries particularly take longer to be brought to the production stage because of structures to be put in place and higher costs, Sharma said. “This is a topic not alien to us. There is an anxiety over the delays. The ministry is advising us and we have made presentations to them about the same,” added Sharma.
Petroleum secretary S. Sundareshan, in a recent interview to Mint, had said that the time lag between discovery and production was a matter of concern and the government should ensure that facilities exist for moving rapidly from discovery to production.
As much as 2.15 million sq. km of India’s total sedimentary area of 3.14 million sq. km has been licensed out, leaving 0.99 million sq. km available for exploration, according to data available on DGH’s website.