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.