Fresh findings off the east coast has world oil majors excited
The findings are fabulous. Extensive seismic operations on India's east coast by the Directorate General of Hydrocarbons (DGHC) have revealed data which has triggered a rush of global oil and gas majors for exploration and drilling rights. The data indicates rich deposits of oil and gas in the region which, some say, may be sufficient to meet the country's energy needs for another 400 years.
Right now, only 37 per cent of India's hydrocarbon demand is met indigenously, the rest being imported. And if the present growth trend continues, indigenous contribution may fall below 25 per cent in the next decade. Latest interpretation carried out by the DGHC suggests some of these fields are as rich as the oil and gas producing west coast of Africa, deep waters of Gabon (Nigeria) and the Campos basin in Brazil, DGHC director general Ashwin Chandra told Outlook, adding: At this stage, it is difficult to conjecture how many companies would actually bid in the coming round. The global market for oil and gas was till recently reeling under the impact of low prices, the lowest in the last 10 years. This resulted in most oil companies slashing their budgets. However, a major revival of price has taken place in the last few months and I am confident that the response will be very good.
Just a couple of years ago, oil companies were wary of buying Indian government data for oil and gas exploration. The scepticism stemmed from the country's poor track record in this area. India discovered its first oilfield (in Assam) way back in 1889, but it took over eight decades for New Delhi to start its first offshore venture in Aliabet (Gujarat), which was followed by the '76 discovery of oil at Bombay High.
According to current estimates, some 60 per cent of India's hydrocarbon reserves, in 3.14 million sq km of sedimentary basins, remains unexplored primarily because of the inabilities of the state-owned oil companies like ongc and Oil India Ltd (oil) to undertake costly and extensive operations. And the terms of participation in the petroleum sector have always been restrictive for foreign operators to take much interest.
Things are changing now. Indian and multinational oil giants have bought data worth nearly $7 million from the DGHC to study prospects in 38 offshore blocks and 10 onshore blocks which have been put on offer by the government. This round of 48 blocks features 10 onshore, in Assam-Akran, Bengal-Purnea, Ganga valley and Rajasthan areas and 38 offshore in the Bengal-Cauvery, Gujarat-Kutch, Krishna-Godavari, Kerala-Konkan, Mumbai, Mahanadi, Palar and Saurashtra basins as well as 12 in the deep water areas off the east coast of India. These 12 deep water blocks off the east coast,in the Cauvery, Palar, Krishna-Godavari, Mahanadi and northeast coast basins,are the focal points of this year's licensing round, framed under a new and completely revised exploration and licensing policy.
The deal offered by the government is very attractive and comparable to global standards. It also provides for a level playing field. They contain no signature, discovery, or production bonus, no mandatory state participation. Besides, there is a seven-year income tax holiday from the beginning of production with no customs duties on imports required for petroleum operations. And there is a biddable cost recovery limit up to 100 per cent with an option to amortise exploration and drilling expenditures over a 10-year period from the start of production. Moreover, the operator is free to market the produced oil and gas in the Indian domestic market or to export some or all of the production. There is also a fiscal stability provision in the contract, says Chandra. He adds, India was never seen as a good place for exploration activities because of certain practices adopted by the government. But we can't let oil and gas companies to go to other places like Kazakhstan, Russia and Brazil. The offer has drawn bids from global giants like Shell, Premier Oil, Cairns Energy, Unocal, Marathon, Amoco, Exxon, Mobil and Indian majors like ongc, Reliance, oil, Indian Oil and gail.
Interestingly, the government has been very guarded about oil and gas possibilities in the eastern region and closely monitored all research studies carried out in the region. In fact, a few months ago, the external affairs ministry and the Indian navy shot down a joint venture between gail and the Naval Research Laboratory (NRL) of the US to prospect for gas hydrates in the Bay of Bengal and the Indian Ocean. The objection was on the grounds that the data generated could enable NRL to formulate anti-submarine warfare tactics in the region.
A senior ongc official says the corporation had recently invited internationally renowned hydrate expert Yuri Makogon to review the seismic data collected by the Dehra Dun-based K.D. Malaviya Institute of Petroleum Exploration. Apparently, in a secret report, Makogon confirmed the presence of unparalleled gas hydrate deposits in the Andaman and Konkan regions. ongc will be bidding for 36 blocks while Reliance Petroleum is also bullish and could be bidding for as many as 10 blocks, the official says. The focus has shifted from the west coast.
An interesting sidelight to the whole affair is that the West Bengal government has been reportedly sending feelers to the DGHC and the petroleum ministry, suggesting the state should be given a 20 to 25 per cent share of the profits from exploration off the Bengal coast. In an effort to give the move a commercial look, the state government even suggested forming a company called West Bengal Oil Exploration which would enter into a joint venture with the company developing the oilfield. But the suggestion has been rejected by the Centre. Perhaps the state should do some more exploration.