Bob Dudley, the global chief executive of $122.87-billion energy giant BP Plc, called on Prime Minister Narendra Modi and petroleum minister Dharmendra Pradhan in New Delhi on Wednesday. This is the first meeting between Dudley and Modi after the latter took charge the prime minister.
“We discussed opportunities and challenges in the Indian energy sector at large and also specific to our deep water exploration and development projects. I see potential for significant additional investments and creation of jobs in the sector. For complex and capital-intensive deepwater projects, appropriate pricing is critical for viability,” Dudley said. In 2011, BP spent $7.2 billion to buy 30% in 21 Reliance Industries (RIL)-operated oil and gas blocks including the most-touted KG-D6. According to sources, the head of the global oil and gas major, which runs operations in nearly 80 countries, told Pradhan that the current government-determined price for deepwater exploration is not remunerative.
The price of domestic natural gas, which was hiked in November last year by the NDA government, was reduced by 7.6% to $5.18 per million British thermal units (mBtu) effective April 1, as the relevant global benchmark prices remained subdued in the second half of 2014. The cabinet on October 18 last year approved the new gas pricing formula, after tweaking the Rangarajan formula approved by the UPA government in June 2013. The price is to be revised every six months.
The CCEA decided that for all discoveries post-November 2014, in ultra-deepwater areas, deepwater areas and high pressure-high temperature areas, a premium would be given on the gas price to be determined as per the prescribed procedure.
Private explorers such as RIL and BP are also pitching to the petroleum ministry to relax the CCEA decision of October 18 last year and allow the ‘premium pricing’ methodology for discoveries made prior to November 2014.
According to consultancy firm McKinsey, about 47 million metric standard cubic metre per day in the next two-five years will come from ‘challenging fields’. Countries such as the US, Russia, Malaysia, China, Canada and Colombia offers incentives to drill hydrocarbon from difficult reserves. These include income tax breaks, investment allowance, lower production tax and pricing returns, said McKinsey.
In addition, after turning it down the first time, the petroleum ministry is re-evaluating UK-based BP’s application seeking permission to roll out aviation turbine fuel retailing operations in India.