New Delhi: The global economic downturn notwithstanding, the Union government has gone ahead and announced India’s biggest auction ever of 70 oil and gas blocks, setting a 10 August deadline for explorers to submit bids. It also invited bids from firms for 10 blocks of coal bed methane (CBM), a form of natural gas extracted from coalbeds and used as a fuel in several industries such as power generation, fertilizers and ceramics.
The auction of oil and gas blocks sale is the eighth round under the so-called New Exploration Licensing Policy (Nelp) launched in January 1999. Under the policy, the government allocates the rights to explore blocks through a bidding process.
Unfazed: On the timing of the bids, petroleum secretary R.S. Pandey says the question was whether to go ahead or sit tight. Madhu Kapparath / Mint
The government has so far awarded 203 exploration blocks, besides 26 blocks of CBM. It attracted bids for 45 of the 57 areas offered in the previous auction last year, when the price of crude oil climbed to a record.
“There might not be as much enthusiasm this time as in previous rounds,” Tony Regan, an independent analyst based in Singapore, said before the auction announcement. “The biggest concern for companies is that India doesn’t allow export of oil or gas and, of course, pricing.”
Worldwide spending on oil and gas exploration may drop 12% in 2009 to $400 billion, Barclays Capital Research said, with crude prices having dropped to around a third of the record they reached in July last year.
“The question was whether to go ahead or sit tight,” said R.S. Pandey, secretary in the petroleum and natural gas ministry, explaining the timing of the auction when global economies are struggling with recession.
“We know the problems...” he added. “Exploration and production is a time-taking activity. It takes several years before the investment phase takes off. By the time the bids are finalized the world will enter a better phase.”
The government did not provide initial estimated investment for the blocks. It may launch another sale in September by offering an additional 40 blocks if the initial response is positive. “If there is no adequate interest, blocks will not be allocated... We can also have a next phase depending upon the response,” Pandey said.
Director general of hydrocarbons V.K. Sibal said the government would organize roadshows overseas to drum up interest among international oil companies. The overseas promotional road shows will be held in Washington and Houston in the US, Perth and Brisbane in Australia, London in the UK and Calgary in Canada.
Bloomberg contributed to this story.