Mumbai: Some industry analysts have claimed that the controversy over the pricing of gas from Reliance Industry Ltd’s (RIL) Krishna-Godavari basin fields will affect participation of international oil majors in Indian upstream projects. But, if past data is any indication, major overseas players have never been overly active in this space.
Of the 162 blocks that were put for auction under six rounds of New Exploration and Licensing Policy (Nelp) so far, only eight of the Platt’s Top 250 list in 2006 have ever made bids for oil blocks in India. They are BP Plc. , Petro Brasileiro SA, ENI SpA, Total SA, Royal Dutch Shell Plc., Gazprom OAO, BG Group Plc., and Santos Ltd.
Platts Top 250 is a global annual survey that measures the financial performance of energy companies with assets of at least $2 billion (Rs8,140 crore).
Only one of the three companies that have made successful bids figure in the list of Top 20 global energy majors. Gazprom of Russia won a block in the first round along with the Indian state-owned gas pipeline company GAIL India Ltd with 50% stake.
Santos of Australia is the only other company on Platt’s list (ranked 157) to win a block—it won two blocks in Nelp 6, the latest exploration block auction round to be concluded. BG and ENI are the other two from the Platt’s list to have minority stakes.
Of the 162 blocks offered so far, foreign companies have participated in 49 blocks, or 29.08% of the area awarded. The average participating interest is 33.18% in these blocks. This means, overall, the net participation of foreign players in this space is just 9.9%.
Of the global Top 10 energy companies, again by Platt’s ranking, only six—BP of the UK, ENI of Italy, Total of France, Chevron of the US, Royal Dutch Shell, Petro Brasiliero of Brazil—have a presence in India.
Others such as ExxonMobil Corp., the world’s largest oil company, ConocoPhillips of the US, Petrochina Co. Ltd, the listed arm of China National Petroleum Corp. (CNPC), mainland China’s biggest producer of oil, and Statoil of Norway have no significant presence in India.
The pricing of Krishna-Godavari basin gas has become a contrioversial issue with RIL suggesting a price of $4.58 per million British thermal units (mBtu), which fertilizer and power industries say is too high.
There have also been allegations that the price discovery process is not transparent. RIL has countered that saying it has followed a transparent process of inviting bids from all consumers along its Kakinada-Ahmedabad pipeline that used more than one million standard cubic metres per day of gas.
Amid the uncertainty over the gas pricing formula, according to market analysts, foreign players may stay away from the Indian oil exploration sector. The next round of bidding for around 80 oil and gas exploration blocks is expected to be held in November, with awards by next June.
India is heavily dependent on imports to meet the growing demand for petroleum products. It is the 11th largest consumer of oil and gas and forecast to be the fifth largest consumer within the next 20 years. Oil consumption is expected to grow rapidly from a current level of 2 million barrels oil per day (mbpd) to 3.2mbpd by 2010. With imports accounting for nearly 70% of the hydrocarbon requirements, the government came up with Nelp to woo foreign players to participate in the sector in 1997.
In a recent letter to the Union cabinet secretary, Reliance Natural Resources Ltd said quoting Nelp statistics: “It is evident that the participation of and stake of the foreign energy majors in the Indian E&P sector is negligible.”
Reliance Natural of the Anil Dhirubhai Ambani Group has insisted that Reliance must sell gas to it at a much lower price of 2.34 per mBtu as agreed at the time of the split between the two brothers—Mukesh Ambani who now heads RIL and Anil Ambani who owns Reliance Natural.
“Everyone believes that the government has been successful in getting foreign players into the Indian exploration and production sector, but the actual data show that the participation of global energy majors in Indian exploration sector is negligible,” says Anchal Kapoor, an analyst at Infraline Energy, an energy consultancy firm.
Of the Top 25 oil companies on Platt’s list, only seven have operations in India. Total of France, for instance, has a tie-up with Hindustan Petroleum Corp. Ltd for India’s first underground LPG storage tank coming up at Vizag in Andhra Pradesh, while BP has a coal methane block.
LUKOIL, Russia’s largest oil company and the second largest private oil company worldwide by proven hydrocarbon reserves, and among the Top 25 Platt’s company, now has presence in India after being bought over by the L.N. Mittal group. Shell has operations in the LNG sector in India.
Chevron Corp. has a 5% stake in Reliance Industries’ 1.2mbpd refinery at Jamnagar.
“We are very much interested in India and hope to participate in the next round of bidding too,” said a spokesman for BP, which had participated in bidding for two blocks in the last round of bidding.