The government has been able to attract significant overseas investment in the Indian hydrocarbon exploration & production (E&P) business through bidding rounds held under the national exploration licensing policy (Nelp). However, big oil companies like Shell and ExxonMobil stayed away from the Nelp auctioning. If the government wants to attract enhanced foreign investment in the E&P sector, it must improve quality of technical data for the offered blocks. Besides, the planned switchover to open acreage licensing policy (Oalp) also needs to be expedited.
?Going forward, the idea of offering blocks through Oalp should be considered. Besides, quality of technical data also needs improvement,? says Ajay Arora, an energy expert with global consultancy firm Ernst & Young (E&Y).
The significance of data quality cannot be overemphasised, given the decreasing number of prospective blocks with each Nelp round. Most blocks offered by the government under the eighth round of Nelp bidding were areas relinquished from blocks auctioned in the previous rounds.
Under the production sharing contract (PSC) signed for exploration blocks, every four years, contractors have to relinquish 25% areas of their allocated blocks not found to be prospective by them during exploration.
The government also needs to expedite implementation of the announced Oalp for auctioning oil & gas acreages for exploration. The government was supposed to move over to Oalp after the seventh Nelp round. However, it failed to do so because of the delay in setting up national data repository that will be accessible to interested bidders throughout the year.
The Oalp system for auctioning oil & gas acreages is supposed to be more investor friendly compared to the current Nelp bidding rounds held once a year. This is because under the Oalp regime, bidders get enough time to evaluate technical data as it is a continuous process.
Under the Nelp system, time-bound bidding is held by the government once a year for a large number of acreages. Access to data is provided for a limited period only. As a result, interested investors do not get adequate time to study data. In contrast, under the Oalp, contractors can access data any time. If they are impressed, they can outline their terms for acquiring exploration rights for the desired acreage. The government can then invite bids to ascertain if other contractors can offer better terms. In case better offers do not come through, the government can allocate the acreage to the interested investor.
India needs to move fast on these two fronts if it wants to expedite the domestic exploration programme. Most of the country?s big oilfields like the Mumbai High are old and in decline. Public sector upstream companies like ONGC and Oil India Ltd (OIL) have not made any high-profile discovery for a long time.
Meanwhile, investment requirement for discovering new oilfields is going to be much higher as most of the potential reserves are in deep or ultra deep areas. Besides, only few companies have credible expertise to undertake exploration programmes in ultra-deep waters where drilling is technologically challenging. So attracting big players is the only option for the government to expedite exploration.