Nature’s way

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With the markets taking a tumble at 15k levels, there are many who are looking out for alternative investments. And here, there are several avenues that are springing up. Commodities have been getting strong attention in the past few months and are expected to provide some solace. Clearly, natural resources are expected to hog the limelight here.

But venturing into this zone directly can be dicey for many. Hence, there have been sector-focussed funds that are coming on to the centre-stage. Funds like Reliance Natural Resources and Sundaram Thematic Energy have garnered more than Rs 8,000 crore in the past few months. Another fund, launched by DSP Merrill Lynch called DSP Natural & Energy is currently open. These funds will look at drawing from the promise of scarce natural resources and the booking demand for energy. They seemed to be gung-ho about the prospects. Here's why.

The NELP VII (new exploration and licensing policy) round has offered 57 oil and gas exploration blocks, nine in shallow water, 19 in deep-sea, and 29 on land, and the bids will close on April 11, 2008. This is the highest number of blocks being offered ever in the previous NELP. NELP has attracted a lot of interest by the companies from unrelated businesses due to relaxed entry norms for bidding the small blocks. The previous oil and gas blocks in the Krishna-Godavari basin, Rawa, awarded to some of the big oil companies in India, like Reliance Industries, ONGC, Cairn Energy, and various other entities, would be ready to extract oil and gas from these awarded blocks this year.

Rationale

Awarding of these blocks to oil and various other companies has renewed the interest and given a good business opportunity for the companies engaged directly or indirectly in the oil and gas sector. Lots of sub-sectors like offshore, drilling, rigging would benefit in this process of oil exploration, as well as some others like gas distribution companies. We could see incremental investments in the sector for exploration and capacities enhancement. The start of the gas extraction and awarding of the oil blocks this year should deliver good results in 3-4 years. 'This sector could see a CAGR growth of 25-30% in three to five years' confirms S Krishna Kumar, fund manager, Sundaram BNP Paribas thematic energy opportunities fund.