Hyderabad: The southern state of Andhra Pradesh is in discussions with global oil and gas firms to forge alliances to participate in the country’s largest ever auction of oil and gas blocks through the eighth round of the new exploration licensing policy (Nelp-8).

Wider reach: An ONGC drilling platform at Bombay High. The company was among the 52 global energy firms that participated in the roadshow hosted by the ministry of petroleum and natural gas in Houston. Bloomberg

Andhra Pradesh is set to become the second Indian state after Gujarat to enter the oil and gas exploration and production segment through bids for oil and gas blocks under Nelp.

The Indian government is offering the highest number of exploration blocks, 70, under the eighth round of Nelp, hoping to attract $3 billion (Rs14,610 crore) of investment.

The Centre, which launched the auction on 9 April with 10 August as the last date for submission of bids, has extended the last date to 12 October after the finance ministry cleared the ambiguity on a tax holiday for natural gas producers. The government has assured a seven-year tax holiday for commercial production of oil and gas.

“The Andhra Pradesh team of bureaucrats has held preliminary round of discussions with some of the global energy leaders that include British Gas Group, British Petroleum Plc, BHP Billiton, Conoco Phillips and Noble Energy seeking alliances," said a senior official in the chief minister’s office (CMO), who did not want to be named.

US energy firm Exxon Mobil Corp., TOTAL SA of France, Devon Energy Corp., Hess Corp., PetroTel Inc., Apache Corp., Reliance Industries Ltd and Oil and Natural Gas Corp. Ltd (ONGC) were among the 52 companies that participated in a roadshow hosted by the ministry of petroleum and natural gas in Houston, in the US.

It was the second roadshow organized by the Indian ministry to promote the 70 exploration blocks offered under Nelp-8 in addition to 10 blocks of coal-bed methane, a form of natural gas produced from coal beds. The first roadshow was held in Mumbai on 8 August.

Some 67 oil and gas exploration and production firms comprising of 53 Indian and 14 foreign energy firms had participated in the Mumbai roadshow.

The Andhra Pradesh government recently decided to enter the oil and gas exploration and development sector and set up a special purpose vehicle (SPV), Andhra Pradesh Gas Infrastructure Corp. Ltd, as a joint venture between two state-owned entities.

The infrastructure provider for industries in the state, AP Industrial Infrastructure Corp. Ltd, or APIIC, would hold 51% in the SPV, while the country’s third largest state-owned power producer, AP Power Generation Corp. Ltd, or AP Genco, would hold the balance, to begin with.

A team of senior state civil servants comprising principal secretary (industries and commerce) Busi Sam Bob and APIIC chairman and managing director B.P. Acharya is now in Houston to interact with global energy companies participating in the roadshows organized by the ministry of petroleum and natural gas.

“We are participating in the roadshows of Nelp-8 on the invitation of director general of hydrocarbons V.K. Sibal. This give us an opportunity to have parleys with the global energy giants at the roadshows, explain (to) them the opportunities that Andhra Pradesh offers and explore the possibility of attracting some of them as strategic partners for our newly floated oil and gas arm, AP Gas Infrastructure Corp.," said Sam Bob.

The official said the government is availing the services of an international agency to arrange business meetings with the global energy firms at the roadshows in Houston.

Acharya said the state government already had a preliminary round of talks with India’s state-owned oil and gas firms, ONGC and Hindustan Petroleum Corp. Ltd (HPCL), to pick up stakes in the SPV.

“As and when we are successful in roping in the strategic partners, both global and domestic, the two key initial partners in the SPV will start divesting their holdings in favour of the prospective strategic partners and ultimately confine themselves to minority holdings," said Acharya.

According to the official in the chief minister’s office mentioned earlier, both ONGC and HPCL said they were open to partnering with the state government’s SPV subject to approvals from their respective boards and the ministry of petroleum of natural gas.

Auction of oil and gas blocks gained impetus through Nelp, under which 100% foreign direct investment participation was permitted.

Global consultancy firm PricewaterhouseCoopers, in a report on oil and gas industry last month, said, “As on 1 April 2009, investment commitment under Nelp is about $10 billion on exploration, against which actual expenditure so far under Nelp is about $4.7 billion. In addition, $5.2 billion investment has been made on development of discoveries."

So far, 71 oil and gas discoveries have been made in 21 exploration blocks over the past 10 years.