Ramping up output from domestic fields is central to India’s vision of achieving energy security. Domestic output, in turn, depends on a host of factors, including unearthed hydrocarbon reserves. Traditionally, India has been heavily dependent on imports, sourcing its crude oil and gas needs from international markets. This dependence has only increased in recent times with imports constituting 85 per cent of the country’s crude oil needs and over 50 per cent of the natural gas requirements. This has nudged the government into overhauling the policy framework that has been holding back exploration activities for many years.
After 2015, the introduction of the Hydrocarbon Exploration Licensing Policy and the Open Acreage Licensing Policy (OALP) has invigorated the hydrocarbon exploration segment. New blocks have been awarded under various rounds and exploration and drilling activities have commenced. However, as these projects have long gestation periods, it will take at least another couple of years before any of the new fields start production.
Progress under the OALP
As of April 2020, four bidding rounds have been successfully conducted under the OALP. A total of 94 exploration blocks have been awarded, covering an area of approximately 136,790 square km. For the next round (Round V), the Directorate General of Hydrocarbons (DGH) has deferred the bid submission date to June 30, 2020 (the round was launched in January 2020). In OALP Bid Round V, 11 blocks with an area of approximately 19,800 square km have been put on offer. The expression of interest (EoI) cycle for Round VI (ended March 31, 2020) and Round VII (ending July 31, 2020) will be merged. Bidding for these two rounds will be launched based on EoIs received till July 31, 2020.
DSF rounds
The first round under the Discovered Small Fields [DSF] Policy was launched in May 2016, offering 67 DSF fields (clubbed into 46 contract areas) for international bidding. In March 2017, 30 contracts for 43 fields were signed. From these fields, in-place locked hydrocarbons reserves of 40 million tonnes (mt) of oil and 22 billion cubic metres of gas are expected to be monetised over a period of 15 years. In February 2018, the government held the second bidding round under the DSF Policy. In this round, 59 DSF fields, estimated to have 189.61 mt oil and oil equivalent gas in place, were put on offer. A total of 23 contracts (comprising 57 fields) were signed in March 2019.
National Seismic Programme
In October 2016, the National Seismic Programme was launched for a fresh appraisal of all sedimentary basins in order to have a better understanding of the country’s hydrocarbon potential. The estimated cost of the project is about Rs 30 billion and it is likely to be completed by March 2021. As of January 31, 2020, the government had approved proposals for conducting 2D seismic surveys for data acquisition, processing and interpretation of 48,243 line km for appraisal. The total field data acquired was for 43,952.04 line km, translating to about 91.1 per cent of the target.
Halted activities due to the lockdown
On account of the nationwide lockdown, oil and gas exploration activity was impacted as seismic firms and oilfield service firms could not operate at optimum levels due to non-availability of labour as well as physical distancing norms. Supply of key exploration equipment from China has also been choked, affecting the commencement of new exploration projects. Besides, the force majeure clause has been invoked by several players that hold blocks under the OALP and DSF rounds (recently awarded), as they have been unable to proceed with their exploration plans. Cairn, for instance, sought an extension of the OALP exploration timeline as seismic surveys and related activity could not be carried out during the lockdown. The company has 51 blocks under the OALP (awarded 2018 onwards) in addition to two DSF blocks.
To provide some relief, in April 2020, the DGH simplified exploration and production procedures by permitting self-certification for a number of compliances for investment in fields during a stipulated time period.
In sum
While the jury is still out on the extent of the lockdown’s impact on hydrocarbon exploration activity, it is certain that the country’s import dependence is far from tapering off in the near future. Though the policy framework for domestic exploration and production has been fixed, its full impact will not be realised until at least 2023-24.