O&G exploration gains strength in 2018

With the aim of cutting import expenses, Government of India has sought to ease up investment in the oil and gas space through policy amendments and liberalisations

January 15, 2019

India holds estimated oil and gas deposit of 28 trillion tonnes, of which 60 per cent is yet to be harnessed

Government is aiming to attract private and foreign technology and investment in developing resources

With help of new strategy, a 5% rise in recovery rate of in-place volume of oil output has been envisaged

The Ministry of Petroleum and Natural Gas has endeavored to “reform, perform and transform’ the sector

Government of India, under the leadership of Prime Minister Shri Narendra Modi, has taken proactive measures to boost the nation’s domestic crude oil and natural gas production. With the aim of cutting import, the Government has sought to ease up investment in the space through policy amendments and liberalisations. India holds estimated oil and gas deposit of 28 trillion tonnes, of which 60 per cent is yet to be harnessed. While India’s proven oil reserves stand at 635 million tonnes, proven gas deposits and estimated shale gas reserves are recorded at 54 trillion cu ft and 96 trillion cu ft, respectively. The aim here has been to attract private and foreign technology and investment in developing these resources.

In August 2018, the Government had put up 26 oil and gas assets for auction with reserves reportedly worth around US$14.3 billion. The bid round–II under the state’s Discovered Small Field Policy involved 60 discovered small fields with reserves in place of about 195 million tonnes. On the occasion, the Government also released the model revenue sharing contract and notice inviting offer for the bidding of assets. Such auctions have been encouraged by the Government’s liberalised Hydrocarbon Exploration Licensing Policy (HELP) as well other provisions to ease regulations and boost competition in oil and gas market. In the bid round–I in 2016, 46 areas were offered, out of which 34 had received over 130 bids.

In May 2018, an open acreage auction of 55 oil and gas blocks by Directorate General of Hydrocarbon, Indian energy regulator, had received 110 bids, asserting investor confidence in the sector. Since 2000, more than 250 blocks have been alloted to bidders. The Union Cabinet in September 2018 had approved a policy to promote and incentivize more efficient methods, including enhanced recovery (ER), improved recovery (IR) and unconventional hydrocarbon (UHC) production, to improve recovery factor of domestic hydrocarbons. This is in line with Central Government’s goal to cut India’s crude oil import by 10 per cent by 2022, as part of a broader strategy to make the nation independent in its energy consumption.

With the help of the new strategy, an increase by 5 per cent in recovery rate of original in-place volume of oil production has been envisaged, resulting in 120 million tonnes of additional oil in next 20 years. In case of gas, a rise of 3 per cent recovery rate on original in-place volume has been estimated, leading to additional output of 52 billion cubic metres of gas. The Government has been planning to offer up to 149 oil and gas fields that are currently operated by Oil and Natural Gas Corporation (ONGC) to private and foreign investors. By offloading these non-priority assets, the government-run oil and gas explorer is aiming to focus on its premium oil and gas fields, while simultaneously monetising the non-core ones.

With the help of the new strategy, an increase by 5 per cent in recovery rate of original in-place volume of oil production has been envisaged, resulting in 120 million tonnes of additional oil in next 20 years

Some of the leading developments in the oil and gas sector in 2018 were:  

  1. Exploration and production
    1. Hydrocarbon Exploration and Licensing Policy (HELP)/Open Acreage Licensing Policy (OALP) –
      This is a paradigm shift from Production Sharing Contract (PSC) regime to Revenue Sharing Contract (RSC) regime based on the principle of ease of doing business. Under OALP Bid Round I, 55 Blocks having area of 59,282 sq km was awarded in October, 2018. OALP Bid Round II with 14 blocks is in the offering.
    2. Policy Framework to Promote and Incentivize Enhanced Recovery Methods –
      The Government has approved the Policy framework to promote adoption of Enhanced Recovery (ER)/Improved Recovery (IR)/Unconventional Hydrocarbon (UHC) production techniques through fiscal incentives and an enabling ecosystem to improve productivity of existing fields and enhance domestic production.
    3. Discovered Small Field Policy (DSF) Policy, Round I and II –  
      For early monetization of unmonetized discoveries of National Oil Companies (NoCs), Cabinet has approved 127 fields for offer under Discovered Small Fields Policy. These assets were awarded under the new regime of Revenue Sharing Model and provide faster development and commercialisation of fields.
    4. National Seismic Programme of Un-appraised areas –
      The Government has taken up 2D seismic survey of entire un-apprised areas. National Seismic Programme was launched in October, 2016 to conduct 2D seismic survey for data Acquisition, Processing and Interpretation (API) of 48,243 line km (LKM) at a cost of over US$412 million and to be completed by 2019-20.
    5. Framework for streamlining Production Sharing Contracts –  
      Under this Policy, Government has allowed two years extension in exploration period and one year in appraisal period for operational blocks in NER besides allowing marketing and pricing freedom for natural gas produced in future in NER; sharing of the statutory levies and tax break in Pre-NELP Exploration Blocks.
    6. Reassessment of Hydrocarbon Resources –
      A multi-organisation team comprising of representatives from ONGC, OIL and DGH has carried out estimation of India’s hydrocarbon resource potential. Conventional hydrocarbon resources in India’s 26 sedimentary basins have been estimated at 41.9 billion tonnes – a rise of 49% from earlier estimates of 28.1 billion tones
    7. Framework for Exploration of Unconventional Hydrocarbons –
      Government has approved the policy to encourage the existing contractors in licensed and leased area to unlock the potential of unconventional hydrocarbons in the existing acreages. Under this policy, an area of 72,027 sq km held under PSCs and 5269 sq km area under CBM contracts has been opened up for exploration.

  2. International Cooperation
    1. Overseas  sourcing
      1. In February 2018, ONGC Videsh, Indian Oil and Bharat Petro Resources acquired 10 per cent interest in Abu Dhabi’s offshore Lower Zakum oil field
      2. The first long term LNG cargo from US arrived at Dhabol in March 2018
      3. In April 2018, Indian Oil acquired 17 per cent stake in the Mukhaizna Oilfield, Oman
      4. The first long term LNG cargo from Russia arrived at Dhahej in June 2018

    2. Important Agreements / Contracts
      1. India’s ISPRL and UAE’s ADNOC signed a deal on oil storage and management in February 2018 for filling 5.9 million barrels in Mangalore
      2. Saudi Aramco and ADNOC signed a deal in June 2018 to jointly build an integrated refinery and petrochemicals complex in Maharashtra
      3. India and US launched Strategic Energy Partnership Ministerial level Energy Dialogue process in April 2018
      4. India and Nepal launched the India-Nepal petroleum products pipeline project connecting from Motihari to Amlekhgunj in April 2018
      5. A deal was signed by India’s Petronet LNG, Sri Lanka Ports Authority and a Japanese firm in April 2018 to set up LNG terminal at Colombo
      6. In September 2018, India-Bangladesh Friendship Pipeline was inaugurated by the Prime Ministers of India and Bangladesh
      7. In November 2018 a deal was signed between ISPRL and ADNOC for exploring participation of ADNOC in Padur SPR

Energy is a key driver of economic growth and the Government of India’s focus has been to bring about transformational changes in the nation’s conventional energy landscape to fulfil the twin objectives of providing energy to all, while minimising the impact on climate. The Government has undertaken several reforms and accomplished major task with far-reaching impacts in the sectors of oil and gas exploration and production, transportation, refinery, marketing, natural gas as well as international collaborations. The Ministry of Petroleum and Natural Gas has endeavored to “reform, perform and transform’ the sector that is expected to boost investor confidence in India’s fast-growing energy market.