What kept foreign players off OALP-1?

Richa Mishra New Delhi | Updated on May 07, 2018 Published on May 07, 2018

Clause on corporate structure proves deterrent; Centre confident of better showing in round 2

A particular clause in the bid document, and not data, seems to have deterred foreign participation in India’s first auction round of the ambitious Open Acreage Licensing Programme (OALP).

The OALP is designed to allow companies to carve out their own exploration areas and also cut down the red tape while plugging the gaps found in the earlier model.

However, one of its clauses states that a holding company with a participating interest in a block must take permission from the authorities here if it wishes to undergo a structural change.

While this helps the government derisk operations and ensure that its revenues are intact, the company concerned may find it impeding its readiness for consolidation, mergers and acquisitions.

The foreign players wanted this particular clause to be tweaked. “What they (foreign participants) are saying is — what happens if the grandfather company is undergoing a structural change,” said a source.

Though not directly involved, the grandfather company, by virtue of having a stake in the holding company, which in turn through its subsidiary has interests in the asset here, could have extended some guarantee or the other.

The players fear that given this backdrop, if the grandfather company by itself is undergoing a structural change, it may be required to seek permission here.

It is understood that Directorate General of Hydrocarbons (DGH) and the Ministry for Petroleum and Natural Gas were open to reviewing the proposal, but the companies were not convinced.

However, the Ministry and DGH are confident that with greater policy flexibility in place, round two will surely see foreign players in. Indications are that majors such as BP and Statoil could participate.

For foreign players, besides the corporate structure issue, which can be reworked, the time taken to study the data and then decide is rather long.

Data blues

The National Data Repository (NDR), which is the backbone of OALP, was unveiled on June 28, 2017. The window for submitting bids for round one was from July to November 2017.

Some players also like to do their own data mapping, said an industry observer, adding that data size alone does not matter — the quality of data also counts.

“Globally, the days of big companies going for only big discoveries is over. They are now willing to go for smaller areas. However, while the appetite for assets has grown, with improved technology, the willingness to take exploration risks has come down,” said an industry expert.

For example, earlier, hitting seven dry holes out of 10 drilled was acceptable, but now this ratio has come to not more than three. “Yes, OALP has revived interest, but it will take time, as companies would like to study data more carefully,” said an observer.

With OALP, the government hopes to win back the trust of the companies, as the model allows them to choose their own areas and enjoy pricing and marketing freedom under the revenue-sharing model. The bids for round one, which ended on May 2, saw public sector giant ONGC and Anil Agarwal’s Vedanta Ltd putting in the highest number of bids. For the 55 blocks on offer, 110 bids were received.

Published on May 07, 2018

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.