India shifts to OALP to boost oil output

In a big leap for oil and gas exploration and production, the government is set to launch the open acreage licensing policy (OALP), which allows a company to select their own exploration block, without waiting for the formal bid round.

As an initial step, a national data policy will be announced within a month. This will be followed by the opening up of a national data repository (NDR), which will have seismic data, among other details, within six months. 

OALP will work under the Hydrocarbon Exploration and Licensing Policy (HELP) that will give investors much freedom in pricing and marketing of crude oil and natural gas. According to the Directorate General of Hydrocarbons, the entire process of bid submission and signing of contract under OALP will take about 13 weeks. Petroleum Minister Dharmendra Pradhan on Monday unveiled OALP features in Houston, the US, where he was to attend an international energy meet.

Through NDR, details of Indian sedimentary basins, gridded into sectors and divided into zones with the corresponding data, will be made available for interested parties. The investors will have flexibility to carve out blocks of their choice through a minimum 10"x10" grid. According to Pradhan, the new policy is a part of the strategy to double India’s existing oil production from current 80 million tonnes to about 150-155 million tonnes by 2022.

India has 26 sedimentary basins covering 3.14 million square kilometres, of which the total area under open acreage licensing will be 2.7 million sq km. Major highlights of HELP will be its revenue sharing model, low royalty rates and 100 per cent foreign direct investment option. The total onshore area under this is around 1.5 million sq km, and offshore area of 1.2 million sq km. OALP will be the second significant step for oil exploration industry this year, after the recent auction of discovered small and marginal fields (DSF). Under the DSF round, each block, on an average, will require an investment of about Rs 100 crore, and all the 31 blocks put together may see an investment of about Rs 3,500 crore. 

The area allotted is expected to have 40 million tonnes of gas and 22 billion cubic metres of oil. 

These blocks are expected to bring a gross revenue of Rs 46,000 crore, out of which the government’s share is likely to be Rs 9,600 crore. Out of the 46 contract areas that were on offer, 34 got about 134 e-bids. Of this, only 31 were awarded. These areas were discovered long before, but could not be monetised for various reasons, such as isolated locations, small size of reserves, high development costs and technological constraints.

OALP will replace the New Exploration Licensing Policy (NELP) regime, under which 10 rounds of auction were held and 254 blocks were awarded. Of these, 170 were relinquished. Areas to be offered under OALP will be carved out of the relinquished area. The last round of NELP took place in 2010.