Thanks to an elephant and a British geologist, India discovered its first oil in the jungles of Assam in 1889, much before any member of OPEC could do it. But that’s history.

The reality today is over 75 per cent of our sedimentary basins are yet to be categorised as “moderate-to-well explored” even as we import over 75 per cent of our oil demand by spending a whopping $134 billion during FY 2011-12. Such high import dependence has led to high trade deficit and widening of current account deficit (CAD). It’s a vicious cycle that can only be broken through a bold vision and a swift set of actions.

Every challenge represents an opportunity. India presents significant unexplored opportunities for the exploration and production (E&P) industry. So far only 73 billion barrels of oil and oil equivalent gas could be established through exploration, out of 205 billion barrels of prognosticated hydrocarbon resources. Thus, about 133 billion barrels of prognosticated resources remain to be unlocked through exploration. The size of the prize when we move the 65 per cent of prognosticated hydrocarbon resources to “in-place volumes” from “yet-to-find” category could be significant.

On an average, India drills about 200 exploratory wells every year while the US drills about 2,000. Factoring in the geological risks, this pace needs to be accelerated to identify and drill out each prospect in the 26 sedimentary basins that provide the hydrocarbon base for India spread over 3 million

The Ministry of Petroleum & Natural Gas recently set the ball rolling with a vision to reduce oil imports by 50 per cent (2020), 75 per cent (2025), and 100 per cent (2030) and a roadmap is being evolved. The first significant step in this direction is the policy decision to allow exploration in all producing blocks, even as the industry awaits further procedural clarity.

The Hydrocarbon Vision 2025 aims at 100 per cent exploration coverage of sedimentary basins by 2025. To achieve this, we should scale up our exploration efforts to move 50 per cent of the sedimentary basin to the ‘moderate-to-well explored’ category in the next five years by:

Providing an enabling policy framework and fiscal terms that are clear, certain and internationally competitive to attract the risk capital and technology.

Establishing Open Area Licensing Policy (OALP) regime swiftly to enable industry to move rapidly to explore attractive blocks rather than waiting for bid rounds.

Revamping regulatory framework to global standards built on principles of self governance, trust and partnership.

National and international experience suggests that higher domestic production has a transformational impact on the host governments. In our own country, Rajasthan is the most recent example.

As per the Rajasthan Budget Study 2013-14, revenue from the petroleum sector now constitutes more than 40 per cent of the total non-tax revenue of the State government from just 0.2 per cent in 2008-09.

The petroleum sector is estimated to contribute Rs 5,500 crore to the State government’s non-tax revenue, primarily because of oil production from the Barmer Basin. Oil discovery and the resultant higher revenues from the sector have helped the State to present a more balanced budget, enabling large fund allocation to social and economic development projects.

From Discovery to Delivery

Over 50 per cent of the time from discovery-to-delivery is wasted in the lengthy “I don’t trust you” approval process — a non-value adding component in any project development.

As a result, out of 117 NELP discoveries as of April 2012, development plan has been approved only for 11 per cent of the discoveries, and very few discoveries are under production, even as we spend Rs 1,800 crore in importing oil every day.

As we seek to scale up exploration programme, there is a need to simultaneously fast-track the project development. We need to set a goal to reduce the cycle time from discovery-to-delivery. In oil and gas sector there is no equipment or facility that requires more than 18 months lead time to commission and no discovered barrel of oil in India is going to cost more to develop than its imported price.

The solution lies in adopting an integrated field development plan that is dynamic and looks at the life cycle of the development of a block vis-à-vis the current process of individual field development plan for a discovery. Controls can be exercised through annual work programme and budget and its amendments on merits. This can significantly shorten the discovery-to-delivery cycle, contributing to domestic production barrel by barrel, as every barrel counts when it saves $100/barrel of precious foreign exchange to a nation whose current account deficit is $78 billion.

Strengthening Governance

Scaling up exploration efforts and fast-tracking discovery-to-delivery demands strengthened governance framework for the E&P sector. This calls for a fully equipped regulator with a permanent, internationally experienced cadre to manage our nation’s oil and gas resource base. At the estimated recoverable reserve base of 2,041 MMT of O+OEG its value is more than $1 trillion, which is almost equivalent to the market capitalisation of all listed companies in India. If a regulator of SEBI stature is required to professionally manage the market, we need to look at how we strengthen and elevate the upstream oil and gas regulator DGH as an institution that promotes risk investment in exploration, facilitates fast-track development, promotes energy security and protects the national interest.

Norway, on which India’s E&P regulatory framework was originally modelled, is an appropriate example to follow. That country has provided statutory powers to a technically strong regulator — the Norwegian Petroleum Directorate (NPD). Well-codified practices, swift and transparent decision making, system of deemed approvals after a set timeline, are hall marks that make NPD an industry benchmark for the governance of E&P activities. And this is what has enabled Norway to increase production over the years and run a sovereign fund of $700 billion that is primarily contributed by a vibrant oil and gas sector providing a high quality of life to its citizens.

The price we will pay, if we do not act now, is clear; we will end up transferring over $1.5 trillion of national wealth to oil exporting countries.

To transform we need to, as a mission, step up and scale up exploration, fast-track discovery-to-delivery cycle time and strengthen governance to facilitate economic development. As the prize could be large, this journey to realise the Hydrocarbon Vision will surely be exciting, if we get set and move!

(The author is CEO of Cairn India.)