Global majors shun India oil, gas block auction

Global majors shun India oil, gas block auction

New Delhi: India failed to woo global players in its latest oil and gas exploration licensing round due to its dim track record of commercial discoveries and sluggish bureaucracy, while most of the 33 blocks went to domestic players.

Asia’s third-largest economy needs private capital for exploration and is encouraging local firms to buy stakes in foreign oil and gas projects to meet its surging energy needs. India imports over 70% of the crude it uses and is keen to tap quickly domestic reservoirs.

Global oil firms are more inclined to invest in countries with higher prospects for finds, but India’s position has also suffered because of bureaucratic sloth.

“Prospectivity is the key issue ... But India can be a difficult country to do business in. There’s the issue of bureaucracy," said Sara Pourghorbani, an analyst at Wood Mackenzie for India.

“Bureaucracy actually seems to be quite a major issue for India. The pace of decision-making is quite slow," Pourghorbani added.

Monday’s auction largely drew interest from international companies that already operate in India such as BG, BHP Billiton and Cairn Energy.

Oil Minister S. Jaipal Reddy called the response to the auction “more than satisfactory" and “very encouraging".

BP, which has just bought a 30% stake in 23 Indian blocks owned by Reliance, did not put in a bid. BG, with BHP Billiton, applied for and won only one block.

Tightening scrutiny

India is competing with big oil-producing countries worldwide for exploration interest that could help it achieve energy self-sufficiency.

The situation has been exacerbated by a regulatory backlash as the government tightens scrutiny of projects to contain the political fallout of massive corruption cases.

Oil Secretary S. Sundareshan told reporters that contracts for the new blocks could be signed within three months.

A total of 34 blocks were initially on offer under the ninth licensing round, but one shallow water block received no bids.

The winning bids have to be endorsed by India’s cabinet. Of the 33 blocks, eight are deepwater, six shallow water and 19 onshore blocks.

Official data showed that foreign firms, including Deep Energy of the United States, had won five blocks, while the rest were bagged by Indian companies, repeating a pattern seen in previous rounds.

A consortium led by India’s state-run explorer ONGC had provisionally won 10 blocks, and Reliance Industries had won two blocks.

The blocks are being offered under India’s New Exploration and Licensing Policy (NELP), which was launched in 1999 offering more attractive terms to boost higher investment in the oil and gas sector of Asia’s third-largest oil consumer.

India is currently producing around 720,000 barrels per day (bpd) of oil, mostly from fields awarded decades ago - less than a quarter of its 3.18 million bpd demand.

Proven oil reserves amounted to 5.8 billion barrels in 2009 - enough only to satisfy its oil needs for about five years, according to the BP Statistical Review.

Indian oil firms are seeking foreign expertise to tap into the country’s largely unexplored deep offshore water, which will require billions of dollars of investment.

The previous eight rounds have been dominated by Indian firms, with ONGC and Oil India bagging more that half of total 234 blocks awarded.