Six firms show interest in 55 oil, gas blocks on offer

India is testing new waters in the oil and gas exploration segment with the launch of bids for the Open Acreage Licensing Programme (OALP), which allows companies to pick their own areas for hydrocarbon exploration.

Sounding optimistic, Oil Minister Dharmendra Pradhan said: “This is the first time that bidders have carved out blocks for themselves. This is also the first time that Uttar Pradesh and Haryana will be added to the oil and gas exploration geography.” Pradhan’s enthusiasm also stems from the spike in crude oil prices, which normally results in a surge in interest in a hydrocarbon hunt.

Asked how he perceives the response so far, Pradhan said: “India does not have a very prolific geology, but despite this, bidders have carved out 59,000 sq km of promising basins (indication enough),” he added.

Fifty-five bidder-selected blocks were announced for bidding. This is the largest offering of acreage the government has announced in the past eight years.

“Six companies have expressed interest for the 55 blocks on offer,” Atanu Chakraborty, Director General, Directorate General of Hydrocarbons, told reporters on the sidelines of the conference to launch the bids.

While both the Minister and DGH refused to divulge the names of players who have envisaged interest, indications are that ONGC and Cairn were the most aggressive bidders.

However, some analysts say that the launching of the bids has to be supplemented with an enabling regulatory regime.

According to one person involved in the sector, “times have changed and a conventional approach may not be successful today. For instance, given the increasing focus on electric vehicles, one does not know what the demand for petro products will be. So, would the players in the E&P regime commit themselves to a 10-year timeline — asset acquisition, field development, minimum work programme, development and production. Who has the time to wait this long?”

Under OALP, companies will carve out areas where they wish to explore, and submit expressions of interest. After the acreage identification they are turned into blocks, and then the DGH calls for bids.

The bids are based on the revenue (gained by selling oil and gas from the block) that companies are willing to share with the government. The company that offers the highest share will win the block and the company that identifies the block will be given a 5 per cent originator incentive in the bidding process. This is a variation from the earlier regime where the Centre specified the area bid out.

While most of the mandatory clearances from the Ministries of Defence and Home Affairs have been received for most blocks, environmental clearances will have to be obtained by the operators.

OALP will be conducted on the closed envelop format unlike the coal bids . “The EoI that carved out the block did not have a commercial bid component. The bidders will not know the number of bids or the revenue commitment received for a block. This will be decrypted only when the bids are opened,” said Chakraborty.

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