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: India is the world’s sixth largest consumer of oil and its policy, politics, stock markets and fisc are currently coping with an oil crisis. One would think, therefore, there would be special urgency in the government to encourage domestic exploration. But the 7th round of the new exploration licensing policy (Nelp) doesn’t hold out much hope. Yes, 181 bids were received for 45 out of the 57 blocks offered. But look at the bidders. Most large players have stayed out and smaller companies dominate the list. British Petroleum, partnering Reliance, and BHP-Billiton, partnering GVK, are the exceptions. Public sector hydrocarbon companies won a lot of bids, mostly by promising to share huge amounts of the returns with the government. This obviously skews the bid against private companies. The gap between surface data and the real picture, in fact, defines Nelp. Started in 1999, Nelp has increased exploration of India’s sedimentary basin area from just 11% in the first five decades of independence to close to 55% over the last nine years. It also led to 46 oil & gas discoveries in 13 of the 164 blocks awarded and, by end-2007, added 600 million tonnes of oil equivalent hydrocarbon reserves. Look closer, though. Nelp has attracted only $3.9 billion so far and out of that, $3.6 billion has been invested by Indian companies. Foreign oil companies have invested a laughably low $347 million so far. A bigger proof of the policy’s lack of success in attracting heavy hitters will be hard to find. No wonder the country’s crude oil production has remained stagnant at around 33 million tonnes over the last five years.
One reason for Nelp-7’s lack of star bidders was that the government twice put off the bid and, in that time, other countries offering bids, like Malaysia and Libya, had come into play. That took some of the players and resources off the table; the cost of hi-tech exploration equipment has shot up. The other more important reason is that private companies are not getting policy clarity. Gas pricing became a political/corporate football that was getting kicked around until a group of ministers took the ball away. There’s been horrible opacity on the status of tax holiday for gas production. Oil’s big boys have other options that present clearer guidelines on returns to investment.
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