Page 5 - AsianOil Week 32 2021

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its most contentious disputes quickly will serve as a positive signal to other upstream inves- tors,which is particularly important in light of OALP-6’s launch on August 6.
New round, new look
In announcing the new round last week the Ministry of Petroleum and Natural Gas said 21 blocks were up for offer – 15 onshore, four in shallow waters and two in ultra-deep waters – and that the closing date for bids was October 6.
Licences are to be awarded by the end of November and are projected to generate $300- 400mn worth of immediate exploration work commitments. OALP-6 is the third round to be held using new terms that were introduced in February 2019.
Under the terms, winners of plays in Cat- egory-II and III basins, which are defined as having seen little to no exploration, are deter- mined by the size of their planned exploration programmes rather than the amount of pro- duction offered to the state. Winners in already producing Category-I basins are selected based upon both their exploration programmes and an agreed 70:30 revenue share with the government.
The 2019 changes build upon OALP’s already attractive terms and were designed to reinvigor- ate interest in rounds that had been dominated by Vedanta, OIL and ONGC. This was not to be the case, however, and of the 105 exploration blocks awarded in the country’s five rounds to date, Vedanta has won 51, OIL has received 25 and ONGC has nabbed 24.
OALP-6’s launch comes little more than a week after Minister of Petroleum and Natural Gas Hardeep Singh Puri pledged that the gov- ernment would work more closely with oil and gas investors to resolve their issues.
When Puri took over the energy ministry in early July he talked about the need to “adapt to changing times, adopt new technologies and to be in consonance with the energy transition”.
This rhetoric continued on July 30, when the minister acknowledged the challenges of deal- ing with past administrations and promised that investors could look forward to a new “open- door” policy to resolve any issues.
Speaking during an investor presentation for the country’s latest discovered small field (DSF) bid round, the official said: “The government stands ready to partner with you both in the identification of what remedial steps we need to take in the ecosystem and what [we] need to do to overcome hurdles.”
The DSF auctions are designed to open up marginal fields that were awarded to ONGC and OIL under the nomination system. These fields were neglected, given their perceived lower return on investment (RoI).
Indeed, some of the winners of the first DSF round, which was initiated in 2016, are now starting to bring their fields onstream. Ulti- mately, however, these fields will not be enough to counter the decline in national production and India needs IOCs with deep pockets to deliver large-scale discoveries.
What next
Indian crude and condensate production has slowly declined from a peak of 38.08mn tonnes (765,000 barrels per day) in fiscal year 2011-2012 to 30.5mn tonnes (612,500 bpd) in 2020-2021, according to data from the Petroleum Planning & Analysis Cell (PPAC).
This decline will become terminal unless the government can find some way of bringing new developers into the sector. New Delhi has been ramping up its efforts in recent years to promote the sector’s investment potential, promising attractive licensing terms and a booming nearby market that is hungry for new oil and gas production.
Until now the regulatory hurdles and risks associated with investments in the upstream have largely overshadowed the potential upside.
Scrapping the retrospective taxation scheme, however, is a major step towards restoring the faith of the international investment community. This, coupled with ongoing efforts to work with developers to identify upstream regulatory and investment hurdles, is likely to finally encourage greater foreign interest in the country’s oil and gas potential.
This may be too late for OALP-6, but it should lay the groundwork for a new wave of interna- tional investment in future bid rounds.™
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