Going Offshore

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The preference for offshore exploration is growing among Indian oil and gas companies. This is especially true with large companies such as Reliance Industries Limited (RIL) and Oil & Natural Gas Corporation (ONGC). RIL, for instance, bid for mostly deep-water blocks in the sixth round of the National Exploration & Licensing Policy (NELP). They were awarded seven deep-water blocks. ONGC, however, bagged 12 deep-water blocks in that round. Given their preference, experts say the trend is not likely to change in the current round (seventh) of NELP. The Directorate General of Hydrocarbons (DGH) has called for bids and the last date for submission is April 25, 2008. On offer are 57 blocks under NELP-VII, of which 29 are onland, 9 are shallow offshore and 19 are offshore deep-water blocks.

Last year, too, onshore blocks were more than offshore deep-water blocks, though the margin between the two was less. Out of 55 blocks on offer then, 25 were onland, 6 were shallow offshore and 24 were offshore deep-water blocks. But the response was good with some $5 billion investment commitment made for some 52 blocks that were bid for by national and international companies during the sixth round. Offshore deep-water blocks, in particular, got some 52 bids out of the total 165 bids then.

What is driving companies offshore is the strike rate achieved there, over the last few years. Reliance Industries’ 10-trillion-cubic-feet-gas discovery in the Krishna-Godavari (KG) basin off the east coast of India in 2002, which is one of the world’s largest gas finds, buoyed companies such as the state-owned ONGC to take up offshore exploration seriously in 2003. Since then a number of hydrocarbon discoveries, especially gas discoveries, have been made in the Krishna-Godavari, Cauvery and Mahanadi basins by both Reliance and ONGC even as significant onland discoveries such as the country’s largest oil find in Rajasthan was made by Cairn Energy in 2003. This then makes it exciting for players to want more offshore than onshore blocks.

Rohit Nagraj, an oil and gas analyst at Mumbai-based brokerage firm Angel Broking explains, “Onshore oil blocks have been fairly explored and developed. If there is one area, which is relatively less developed, it is offshore.” This point is reiterated by SP Singh, general manager, exploration and production, Hindustan Petroleum Corporation Ltd (HPCL). He also holds additional charge of the latter’s oil and gas upstream subsidiary