In several cases, irrational bidding, quoting very high revenue share — even above 90% at the peak production level during the contract period — had raised serious concerns of back-loading of production.
With changed rules under the revised Open Acreage Licensing Policy (OALP) allowing contractors bidding for blocks in category 2 and 3 basins to not share any revenue unless windfall gains are made, explorers including state-run ONGC are looking to carve out blocks in these basins starting from the fourth round.
Category 2 and 3 basins are unexplored and not much geoscientific data are available about them. “We will focus on category 2 and 3 basins from the next round (of OALP) and work to look for new discoveries,” an ONGC executive said. This will put new basins on India’s hydrocarbon production map. During the first three rounds, a few blocks from category 2 and 3 basins were carved out by explorers. Of the 55 expressions of interest submitted during the first round, 49 were in category 1 basin with proven commerciality. In the second and third rounds, the Directorate General of Hydrocarbons carved out nine blocks from category 2 and 3 basins and put up for bidding. “We will develop a portfolio (of blocks) which will have focus on new basins,” the executive added.
Apart from the changes in the revenue share, the government has also decided to provide concession in royalty of 10% in category 1 basins, 20% in category 2 basins and 30% in category 3 basins if production is commenced within four years for on-land and shallow water blocks and five years for deep and ultra-deep water blocks from effective date of contract. The new rules will be applicable from the fourth round of OALP.
The government was forced to dilute the revenue-sharing model for hydrocarbon exploration two years after its launch. In several cases, irrational bidding, quoting very high revenue share — even above 90% at the peak production level during the contract period — had raised serious concerns of back-loading of production. It was suspected that in case of category 1 fields with proven reserves, companies were bidding aggressively on revenue share to get hold of the assets but were slow on development plans, frustrating the government’s objective of stepping up domestic production of oil and gas.
The Centre was also concerned about contractors not opting for the unexplored blocks in category 2 and 3 basins where they need to explore and establish the prospects. The ONGC executive said apart from the changed policy stance, new data available from the National Seismic Programme is encouraging for the companies and added that Vindhyan, Ganga, Andaman, Mahanadi and Kadappa are some of the basins that are promising.
India has 26 sedimentary basins divided into three categories: Seven in the first category where commercial productivity has been proven, five in category 2 and 14 in category 3 don’t not have proven commercial productivity. Seven basins in category I have 35,511 million tonne oil equivalent (MTOE) of total in-place reserves out of the total 41,872 MTOE across 26 basins.