India received bids for about 34 of the 46 small oil and gas blocks offered in an auction that ended on Monday, mostly from local private companies, many of them new entities venturing into the hydrocarbon industry under a liberal contractual regime that the government offered to woo investments.
Large global players, which are currently cutting back their capital spending in view of prevailing low oil and gas prices, remained conspicuously absent from the auction.
State-run companies like Indian Oil Corp., Gail (India) Ltd, Oil India Ltd, Prize Petroleum Co. Ltd and Bharat Petro Resources Ltd took part in the bidding that was dominated by new entrepreneurs.
Experts described the auction response as very positive given depressed oil prices.
The liberal licensing regime for the small and marginal fields approved by the union cabinet on 2 September last year allowed entities without prior experience in the sector to participate in the auctions in a departure from the previous auctions aimed at attracting capital. This has enabled new players with aspirations to get into the hydrocarbon sector to take the limited risk of investing in fields with discoveries.
“The bid round took place in a challenging global market environment when oil and gas prices have been volatile and investment in the exploration and production sector has seen a substantial decline. Despite the above challenges, the response to the discovered small fields bid round has been very favourable and exceeded expectations,” said a statement from the oil ministry.
The bids will be evaluated in a time-bound manner and contract areas would be awarded at the earliest, added the statement.
While there were bidders for all the 26 onshore fields, only eight of the 20 offshore fields received bids.
“Complexity as well as cost of operations are significantly high in offshore fields compared to onshore fields, which explains the investor preference for onshore fields in a low price environment,” said Kalpana Jain, senior director at Deloitte in India.
The government is keen to cut down import dependence of oil and gas by 10 percentage points to 67% by 2022. “Getting 134 bids for 34 of the 46 contract areas on offer is a very positive outcome given the prevailing price levels and scarcity of capital,” said Anish De, partner and head of oil and gas at KPMG in India.
In 2015-16, India consumed 184.6 million tonnes of petroleum products, 11.5% more than what the country consumed a year ago.
An oil ministry official said reducing import dependence involves augmenting production from existing producing fields as well as increasing the acreage under exploration and development.
“We have given directions to state-owned companies to adopt new technology and practices to boost output,” said the official.