The current demand for oil and gas in the country outstrips supply by a wide margin. To bridge this gap between demand and supply, India has resorted to importing crude oil. In 2017-18, over 45 per cent of the natural gas and over 82 per cent of the crude oil consumption was imported. This has obviously affected India’s oil import bill as well. To increase domestic production, a number of initiatives are being taken by the government to attract investments in exploration and production (E&P) and setting up transmission and distribution infrastructure. The biggest achievement has been the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP) and the Open Acreage Licensing Policy (OALP). These policies allow exploration companies to propose their own area/block for bidding and provide a uniform licensing system to cover all hydrocarbons under a single licensing framework. Under the OALP Bid Round I, the government has signed contracts for 55 blocks with six companies. The centre will call for bids for the second and third rounds of oil and gas auctions under the new OALP regime soon.
Assessing the resource potential
The E&P segment has moved from the pre-New Exploration and Licensing Policy (NELP) days in the 1980s to the NELP in the 1990s and 2000s and finally to HELP in March 2016. The government has increasingly used public-private partnership (PPP) as the framework for implementing these policies. In 2017, the government reassessed the resource potential of its existing 26 sedimentary basins by conducting a hydrocarbon resource reassessment study. As per the findings of the study, the existing sedimentary basins cover an area of 3.36 million square km. Based on this, the government has recategorised the existing sedimentary basins into Category I, II and III basins. Basins where hydrocarbon commercial production has commenced are listed under Category I (e.g. Assam and the Arakan fold belt, Cambay, Cauvery, Bombay High, Krishna-Godavari [KG] basin). Discoveries/Basins where the presence of hydrocarbons is established but commercial production is yet to start are listed under Category II. These include the Andaman, Kutch, Mahanadi, Saurashtra and Vindhyan basins. Third, basins where the presence of hydrocarbons is yet to be established but geologists believe that they can be brought to production based on available data are listed under Category III. These include the Himalayan Foreland, Ganga-Punjab, Kerala-Konkan, Bengal-Purnea, Karewa and Spiti-Zanskar basins. In all, India currently has 12,076 million metric tonnes of oil equivalent (mmtoe) of discovered hydrocarbons and 29,796 mmtoe of undiscovered hydrocarbons.
Update on HELP and DSF
HELP, announced in March 2016, replaced the earlier NELP that had been in place since 1997-98. HELP proposes radical changes in terms of moving to a revenue-sharing regime and introduction of a single licence as well as a shift to open acreage licensing. The OALP regime gives companies the freedom to select blocks or areas to explore and produce oil and gas after studying the seismic data available in the National Data Repository (NDR). The new policy framework provides a revenue-sharing model for the oil and gas blocks. Besides, it also provides marketing and pricing freedom for the oil and gas produced from these blocks.
In Round I of the OALP, 110 bids were received for the 55 blocks on offer. Contracts for the 55 blocks were signed on October 1, 2018. The second round of the OALP is now in advanced stages of approval. The first round offered over 60,000 square km of hydrocarbon sedimentary area for auction, and the second and third rounds are proposed to offer 30,000 square km.
Approved by the government in September 2015, the Discovered Small Fields [DSF] Policy was one among a slew of policies expected to help reduce the country’s dependence on oil and gas imports. The first round of bids for the DSF was conducted in 2016. The government awarded 30 contract areas to 20 companies in the auction. Thereafter, in February 2018, the cabinet approved the second round of DSF bidding, with 60 small fields on offer. The bidding process commenced in September 2018.
This round has a unique feature in that bidders do not require any previous technical experience for submitting bids.
National Data Repository
Launched on June 28, 2017, the NDR aims to better map the hydrocarbon resources in the country. It broadly provides information on oil and gas assets across the country and has been a useful asset for the success of the OALP, which was launched at the same time.
Conclusion
Going forward, the oil and gas sector is likely to be reshaped by these policy changes. The government is now offering a number of oil and gas blocks for E&P under the HELP and DSF bidding rounds to increase domestic production. These measures are expected to give a significant impetus to the domestic oil and gas sector along with a resultant reduction in imports.
Based on a presentation by Ranajit Banerjee, Advisor, Strategic Planning and Finance, Directorate General of Hydrocarbons, at a recent India Infrastructure conference