India’s latest round of oil and gas block auction has witnessed significant interest from state-run and private players, with Vedanta Ltd. bidding on all 28 available blocks, highlighting the growing enthusiasm among private players to expand their domestic upstream footprint.
“We are seeing growing interest from domestic private companies in the upstream sector, which is a good sign. But I see state-run companies, like ONGC and Oil India, continuing to play a bigger role in that sector,” said a senior Indian oil industry source.
Oil ministry officials said it had received a total of 60 bids in its latest round of the Open Acreage Licensing Policy — or OALP — under which 28 blocks, spread over 136,596 sq km, were offered in eight sedimentary basins, where companies will have the freedom to carve out their areas for drilling.
“No foreign exploration company has bid on a standalone basis in the latest round of auction of oil and gas blocks,” said an official of the Directorate General of Hydrocarbons, the market regulator for India’s upstream sector.
Out of the total blocks offered for bidding, nine blocks are on land, eight blocks are in shallow waters and 11 blocks are in the deep water.
“OALP bidding, with its attractive terms, has continued to draw significant interest from domestic private players. Foreign interest in OALP is going to be influenced by global oil price scenarios and geopolitics. But once a large hydrocarbon discovery happens in the future, foreign bidders would see a much greater incentive to bid in subsequent rounds,” said an oil and gas analyst.
Vedanta, ONGC bids eye majority of the blocks
State-run ONGC and Oil India Limited have submitted independent bids for 15 and six blocks, respectively, while private firm Sun Petrochemicals has submitted bids for seven blocks. ONGC, in consortium with Reliance Industries Limited and BP plc, has submitted a bid for a shallow-water block in the Saurashtra Basin.
According to analysts at S&P Global Commodity Insights, out of the 28 blocks that are on offer, 16 blocks are category-1 basins, which have reserves and are already in producing stage, while 12 blocks are in category-2, which have contingent resources but are pending commercial production. No category-3 blocks, which have prospective resources and are awaiting discovery, were offered in the ninth round.
“Category-1 basins in India are in their maturing phase. However, unexplored hydrocarbon potential still exists in these basins, primarily in the deepwater areas of Mumbai, Krishna-Godavari and Cauvery offshore. In addition to exploring deepwater potential, India needs to align with global exploration trends by seeking hydrocarbons in unconventional traps and in the innovative plays within these matured basins, both onshore and offshore,” said Rahul Chauhan, upstream analyst at Commodity Insights.
Vedanta Limited is the only firm that has submitted bids for all 28 offered blocks.
Cairn Oil and Gas is the upstream part of Vedanta. Cairn’s deputy CEO Steve Moore told Commodity Insights in a recent interview that the company’s focus now is on exploring shallow and deep-water blocks, which present new opportunities. This will help achieve the company’s growth vision of doubling its share of India’s domestic oil and gas output.
Analysts said the latest round of oil and gas block auction generated considerable interest among investors and bidders as the ruling National Democratic Alliance government returned to power for the third consecutive time in June after general elections, promising policy continuity.
Focus on domestic, overseas opportunities
India allows upstream companies to carve out areas for oil and gas exploration under OALP. The flexible upstream policy allows explorers to put in an expression of interest for any area throughout the year and the areas earmarked are then put on auction.
India has awarded 144 oil and gas blocks offering around 242,055 sq km for exploration in the previous eight rounds of OALP.Upstream output has been declining nearly 1.1% on a compound annual growth rate over the past 10 years due to a natural drop in mature fields of state-run upstream producers ONGC and Oil India, coupled with a lack of monetization of existing discoveries and a reduced number of new discoveries, analysts at Commodity Insights said.
In addition to domestic initiatives, India has stepped up efforts to boost its presence in the overseas upstream sector.
India and the UAE recently signed a production concession agreement for Abu Dhabi Onshore Block 1 between Urja Bharat — a joint venture between Indian Oil Corp. and Bharat Petro Resources Ltd — and ADNOC. It is the first such agreement for any Indian company operating in the UAE.
Recently, Indian Petroleum Minister Hardeep Singh Puri visited Brazil and discussed with their officials to look for opportunities for upstream collaboration, especially in offshore deep and ultra-deepwater exploration and production projects.
Source: spglobal.com