MUMBAI—With sweeping reforms, India aims to attract investments worth over US$40 billion in the next five years in oil and gas exploration and production, said Minister of Petroleum and Natural Gas Dharmendra Pradhan.
A cumulative investment of US$40 billion is expected in Indian E&P sector in the next 4 to 5 years, Pradhan told media recently on the sidelines of an event held at Mumbai.
The minister said that the government's liberal policies and transformational reforms undertaken recently, have led to an investment of over US$25 billion being committed under Production Sharing Contract (PSC) regime.
Indian federal government has taken some policy decision in recent years to enhance exploration and production activities and to attract investments in the sector.
With the objective of enhancing domestic oil and gas production, and encouraging investment, the government has introduced the new Hydrocarbon Exploration and Licensing Policy (HELP) in March, 2016.
HELP gives operators the freedom to market produced oil and gas domestically through a transparent bidding process, and alleviates the conflicts experienced in early New Exploration Licensing Policy (NELP) licensing policy. With the introduction of HELP, India also plans to reduce its import dependency in oil and gas sector by 10% by 2022.
HELP also does away with cost recovery based on pretax investment multiples and simplifies the revenue sharing model.
Under the new (HELP) policy, exploration periods are extended to 8 years for onshore and shallow-water areas and 10 years for deep and ultra-deepwater blocks. In contrast, under the earlier NELP policy, these periods were 7 years and 8 years, respectively.
Until 2010, NELP launched nine rounds of bidding but the policy largely been unsuccessful in meeting its objective of increasing production and attracting international investors.
Altogether, in nine bid rounds to date, NELP awarded 254 blocks to national, private, domestic, and foreign companies, generating US$25 billion of investments as of March 2015.
Analysts say that the replaced policy (HELP) is still at a preliminary stage and it will be a few years before they can really assess the impact of the policy (HELP).
Apart from HELP, the government is banking on investments from three key reforms in the petroleum sector, which include, Discovered Small Fields (DSF), Open Acreage Licensing (OAL), and Production Enhancement Contracts (PEC).
In the first round of DSF policy, announced earlier this year, the government awarded blocks to 30 companies in 23 onshore and seven offshore blocks. The government had received 134 bids for 34 of the 46 contract areas in an auction held in November last year.
India expects about US $5 billion to US$6billion in exploration activities under OAL, while another US$20 billion to US$30 billion for development activities is expected under the policy.
The attraction for investors under OAL include that the policy allows companies to select blocks or areas after studying seismic data to explore and produce oil and gas.
Investors have also option to bid for oil and gas fields through the year under OAL and are promised marketing and pricing freedom for oil and gas produced.
Reports suggest that Directorate General of Hydrocarbons (DGH), the upstream regulator, has received 51 proposals seeking about 60,000 sq. km of area for exploration of oil and gas under the maiden open acreage licensing.
Moreover, to consolidate and store all the Geoscientific data available in the country and to create a base for OAL policy, the government has taken initiative to build National Data Repository (NDR) for Oil and Gas Industry in the country.
NDR holds 160 terabyte information on sedimentary basins. Companies, after studying geological data, can submit expressions of interest (EOIs) for hydrocarbon blocks of their choice.
While speaking on NDR, Pradhan said that more than 100 companies have visited the data room and they are analyzing the data.