All unexplored oil fields to go under the hammer in 2017
New Delhi: The oil ministry is preparing to offer nearly half of India’s 3 million sq. km of sedimentary basins at one go to energy companies for exploration next year under a new auction method designed to give more choice and easier terms to bidders. The idea is to get exploration going in as many fields as possible.
In a departure from the practice of offering a limited number of fields for auction at a time, all unexplored basins will be open for bidding.
Under rules being framed under the “open acreage policy” cleared by the Union cabinet in March, any application received for a particular block will immediately lead to the authorities inviting counter-bids. “We are readying modalities for inviting counter-bids as well as the software application to let firms make expressions of interest and the counter-bids,” said a government official on condition of anonymity. Geological data for reference will be made available by Halliburton Offshore Services Inc. hired by the government.
Sudhir Mathur, acting chief executive officer, Cairn India Ltd, welcomed the new policy. “We believe this is the inflection point to unlocking value from Indian geology. It will help in attracting domestic as well as foreign direct investment, create more skilled jobs in the country and eventually help reduce import dependence. Cairn is eager to participate in the open acreage licensing policy,” said Mathur. Cairn India accounts for over 27% of domestic crude oil production of 37 million tonnes and has plans to raise it to 50% over the next few years.
The new licensing regime for oil and gas fields called the Hydrocarbon Exploration Licensing Policy (HELP), which also covers the open acreage policy, offers pricing freedom under a simple revenue share contract.
The sedimentary basins in India are hardly explored to their potential under earlier licensing regimes and require more investments in exploration, said Debasish Mishra, partner, Deloitte Touche Tohmatsu India LLP. “The new licensing regime-HELP—allows rights over all kinds of resources including unconventional ones under a single licence. Besides, the shift from profit sharing to revenue sharing reduces regulatory interventions. Regulatory focus will now remain on the optimum utilisation of the licence and safety, not on cost incurred,” said Mishra.
India hopes to increase domestic production in a bid to reduce import dependence on fossil fuels by 10 percentage points to 67% by 2022. The government official quoted above said instructions have been issued to state-run Oil and Natural Gas Corp. (ONGC), which produces 60% of the country’s crude oil output and 65% of gas output, to ramp up production. The company had 329 oil discoveries and 175 gas discoveries at the beginning of this fiscal. Private companies have 119 oil discoveries and 113 gas discoveries.
The wider choice of blocks and the liberal licensing regime the government adopted in March is set to be tested at a time global energy companies are cutting back on their capital spending in line with subdued oil and gas prices.
The 26 sedimentary basins are classified into four, ranging from those with established commercial production to those with uncertain potential.