Hyderabad: The Andhra Pradesh government will participate in the country’s largest auction of oil and gas blocks through the eighth round of the New Exploration Licensing Policy (Nelp), two senior state officials said. This would make Andhra the second state in India after Gujarat to bid for oil and gas blocks through Nelp.
Energy hunt: Andhra Pradesh chief minister Y.S. Rajasekhara Reddy has asked Apiic and AP Genco to form a joint venture. Bharath Sai / Mint
“The chief minister Dr. Y.S. Rajasekhara Reddy has asked two of the government corporations, AP Industrial Infrastructure Corp. Ltd (APIIC) and AP State Power Generation Corp. Ltd (AP Genco), to form a joint venture,” said an official at the chief minister’s office, or CMO.
The state government has instructed the two corporations to “appoint a leading domestic or international consultant to prepare a detailed roadmap before participating in the Nelp bids,” said a top APIIC official. Both the officials didn’t want to be named.
“The proposed joint venture...would rope in a strategic partner with technical expertise in oil and gas exploration, which could be either one of the state-owned oil companies or a leading foreign oil firm,” the APIIC official said.
AP Genco, India’s third-largest state-owned power producer, has planned to nearly treble its capacity to 22,488MW by 2012, investing Rs63,000 crore, but is finding it difficult to secure fuel supplies to some 2,100MW of gas-based power project proposed at Karimnagar in the Telangana region.
India is set to auction 70 exploration blocks under the eighth round of Nelp, including 24 deepwater and 28 shallow water blocks, hoping to attract investments worth $3 billion (Rs14,457 crore).
The auction will start on 8 August and end in mid-October, revised from the earlier 9 April to 10 August schedule.
“The extension of date for the eighth round of Nelp bids has come in our favour. The state government will ensure incorporation of a joint venture company by next month,” the CMO executive said.
Oil exploration and production in India has received a major impetus through Nelp, which was first implemented in 1999. Over the past decade and through seven rounds of auctions under Nelp, exploration in India has increased to 50% of the country’s sedimentary basin from a mere 11%.
India expects to increase the area under exploration to 80% of its total sedimentary basin, petroleum secretary R.S. Pandey said in April while launching the eighth round of Nelp.
“The AP government will have to take a conscious decision on risking the public money, given the risks involved in the oil and gas exploration sector,” said Kameswara Rao, executive director, energy, utilities and mining, at consultancy firm PricewaterhouseCoopers. “However, with the eighth round of Nelp bids involving shallow water blocks as well, which involve modest investments, it would be contiguous for the state government and attractive given the rising global oil prices.”
The CMO executive said the plan to enter oil and gas exploration was taken after a long debate. “The government is ready to risk an amount of as high as Rs1,000 crore over the next 4-5 years given the anticipated reward of some Rs30,000-50,000 crore if successful in finding oil and gas reserves.”
Director general of hydrocarbons, V.K. Sibal, is slated to make a presentation to the Andhra chief minister and some senior government officials on 11 August at Hyderabad on opportunities that the hydrocarbons sector provides, he added.
AP Genco has a power generation capacity of 7,588MW, behind National
Thermal Power Corp. Ltd (NTPC)’s 30,144MW and Maharashtra State Power Generation Corp. Ltd’s (Mahagenco) 9,996MW.
The firm reported revenue of Rs6,200 crore and net profit of Rs258 crore in 2008-09 and expects to generate internal accruals of some Rs2,000 crore over the next five years.
APIIC, which owns stakes in several infrastructure projects, earned some Rs3,500 crore in 2007-08 and Rs1,260 crore in 2008-09 through allocation and auction of land for industrial and infrastructure operations.