New Delhi: In what may further reduce interest in hydrocarbon blocks offered through India’s new exploration and licensing policy (Nelp), Italy’s Eni SpA has been unable to drill exploratory wells in a deep-water block bid that it won in the fifth Nelp round.
Nelp was approved by the government in 1997 and operationalized in January 1999 to boost hydrocarbon exploration in the country. Under this, the government allocates the rights to explore blocks through a bidding process and has done this in nine phases so far. But this requires prior clearance from several ministries, including the ministry of defence, which takes into consideration the opinion of the department of space (DoS).
The block, AN-DWN-2003/2, falls in the Andaman and Nicobar Islands area and is spread over 13,110 square km in the Indian Ocean. The first phase of exploration is scheduled to end on 4 June 2013 for the block that was awarded in 2005. DoS has denied permission for drilling windows twice, due to the proximity of the block to the rocket stage impact zone of the Indian Space Research Organisation (Isro).
According to the production-sharing contract signed between Eni and the Indian government, the contractor was to provide details of its survey to India’s Directorate General of Hydrocarbons (DGH) “to enable it to coordinate with Isro/DoS...in relation to their space programme in rocket stage impact zone”.
Without drilling the wells, Eni India Ltd wouldn’t be able to meet its minimum work programme commitments. While Eni is the operator with a 40% stake, state-owned Oil and Natural Gas Corp. Ltd and GAIL (India) Ltd hold 45% and 15%, respectively.
Documents reviewed by Mint disclose that Eni India had earlier asked for permission to drill between February and May this year, which was denied by DoS.
ENI then made a fresh application requesting for drilling of the Dugong-I well between April and July.
The DGH appeal for clearance was rejected by DoS, said a senior official in India’s petroleum and natural gas ministry, who did not want to be identified.
While S.K. Srivastava, director general of hydrocarbons, did not respond to repeated phone calls or to a message left on his cellphone, another petroleum ministry official, who also requested anonymity, said, “Sometimes permission is not given due to some specific programmes.”
Confirming the rejection of the application to drill, S. Satish, spokesperson for Isro, said that “safety issues” prompted the space agency’s decision. “The area falls in the rocket impact zone. So if there’s an oil well, there are chances of an explosion,” he said.
Questions emailed to the offices of Eni SpA and Eni India remained unanswered at the time of filing the story. Messages left in the respective offices were also not returned.
The documents disclose that the petroleum ministry is apprehensive about the adverse fallout of the DoS actions on foreign investor sentiment.
“Refusal to grant permission for exploratory drilling...will not only seriously impact the intensive exploration effort in the east coast basin and Andaman basin where many blocks are in operation under Nelp, but also affect the image of India as a preferred destination...in the eyes of the international E&P (exploration and production) companies,” the document said.
This is significant because India’s ninth round of auctions of hydrocarbon exploration blocks received a muted response in March. To be sure, the response of international oil firms to Nelp rounds have been consistently lukewarm.
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.