E&P looks at $10-bn foreign investment by 2010

Font Size

Print

Feedback

Email

Discuss

Related Articles

Agency to manage govt debt takes shapeSEZs draw investors as hurdles filter policyRising rates could hurt new investment: Kamath'FDI to exceed $35 bn target in 2008-09'

Mumbai, Nov 19: After years of under-investment in the exploration and production (E&P) sector in India due to the rigid government regulatory frameworks, a wave of foreign investment is expected in the near term, say experts. Relaxed rules and regulations for investors have attracted the investment, they add.

A recent Ernst & Young report on the upstream sector states the possible funding sources in the sector would be sovereign wealth funds based out of China, the Middle East and Singapore, which are seeking to acquire E&P assets in India. Also, Japanese banking institutions possessing large pools of cash are focusing on the Indian E&P sector. According to an analyst working with a Mumbai-based broking firm, foreign investments of up to $10 billion in the Indian E&P sector is expected by 2010.

Though in 1999, the government of India introduced Nelp (New Exploration Licensing Policy) to provide attractive incentives and level playing field to new entrants, including foreign companies, in the E&P sector. There is a likelihood of more investments coming in to India in the near future. After the opening up of the E&P sector, many players domestic and international companies, barring PSUs (public sector undertakings) like ONGC (Oil and Natural Gas Corporation) and OIL (Oil India Ltd), entered the arena.

Talking about the issues and challenges surrounding the sector in India, Venkatesh Prasad, partner, J Sagar Associates, said Nelp helped raise the interest of foreign players in the sector. According to a set of rules in Nelp, foreign investors are exposed to one window system for procuring and renewing licences for their joint ventures in India. “Prior to Nelp, Indian E&P infrastructure was state owned but with easier rules incorporated in Nelp, foreign investors’ interests remain protected,” said Prasad.

It may be noted that after being convinced Nelp is transparent, many international agencies like energy giants British Petroleum, British Gas and French multinational TOTAL had bid for oil and gas exploration rights in India in 2006.

Elaborating more on Nelp, Dilip Khanna, partner, Ernst & Young said, “Nelp has been instrumental in attracting private sector and foreign investment to the domestic upstream segment. In the seven rounds of bidding conducted so far, 207 blocks have been awarded to various players who have made a cumulative investment commitment of nearly $10 billion. Unexplored acreage in the country’s total sedimentary area has dropped from 41% in FY ‘99 to 15% in FY ‘07.”