India announces new licensing policy to boost oil output

India will conduct auction of oil and gas blocks under OALP, says Dharmendra Pradhan

India on Tuesday announced an open acreage licensing policy for oil and gas exploration, allowing bidders to carve out areas where they want to drill as the energy- hungry country looks at greater foreign investment to boost output.

The world's third-largest oil consumer will conduct auction of oil and gas blocks under the Open Acreage Licensing Policy (OALP) twice a year, with the first round being held in July this year, Oil Minister Dharmendra Pradhan said here at the influential CERAWeek conference.

OALP auction will be held under the overhauled exploration licensing policy allows pricing and marketing freedom to operators and shifts to a revenue sharing model.

The July auction will be India's first major exploration licensing round since 2010, although it had recently awarded 31 small discovered fields mainly to state-owned and local firms under the liberalised Hydrocarbon Exploration Licensing Policy (HELP).

Showcasing HELP, which was approved by the Union Cabinet on March 10 last year, to global investors, Pradhan said the new policy is part of the strategy to make India a business and investor friendly destination and cut import dependence by 10 per cent by 2022.

"In the new model, government will not micromanage, micro monitor with producers. Government will only share revenue. It will be an open and regular affair," Pradhan told reporters on sidelines of the CERAWeek Conference here.

India's domestic crude oil production of 36.95 million tons in 2015-16 barely met 20 per cent of its oil needs. Natural gas output at 32.249 billion cubic metres meets less than half of its needs.

OALP will be a departure from the current licensing policy of government identifying the oil and gas blocks and then putting them on auction.

It gives an option to a company looking for exploring hydrocarbons to select the exploration areas on its own. This selection can be done based on the seismic and well data that the Directorate-General of Hydrocarbons has put in a National Data Repository. NDR offers a total of 160 terabyte data of India's 26 sedimentary basins.

DGH head Atanu Chakraborty in a presentation at the CERAWeek conference said OPAL allows "Flexibility for Investors to carve out blocks of their choice through a minimum [10'x10'] grid."

He said about 2.7 million square kilometre out of 3.14 mn sq km of sedimentary area will offered for a pick under HELP through OALP, he said. This comprises of 1.5 mn sq km of onshore and 1.2 mn sq km of offshore area.

Once a company demarcates the area by identifying the size and boundaries, the government will put it up for bidding and award it to the firm that offers the maximum share. The company identifying the area will get a small weightage in the bid evaluation.

Bidders will be offered the choice of either a 8 year Petroleum Operations Contract for exploration and 20 years for development and production or a three-year Reconnaissance Contract for probing for oil and gas, Chakraborty said.

Pradhan is leading a high-powered delegation to Houston to attend CERAWeek 2017 - an international meeting of top leaders from the oil, energy and natural gas industry.

In addition to the Canadian Prime Minister, the week-long meeting is being attended by oil and energy ministers from countries like Russia, Saudi Arabia and United Arab Emirates.

"The policy aims to propel investment in the energy and petroleum sector and provide operational flexibility to the investors," he said.

One of the key features of the new policy is Open Acreage licensing which permits investors to select the exploration blocks after accessing G&G and historic data of India through the national data repository. They can then submit expression of interest for such blocks without waiting for formal bid round.

Pradhan hoped that the bidding under the new policy would be in mid-July.

Pradhan said the Union government is also contemplating a policy for production enhancement of mature fields currently being operated by national oil companies by inducting partners to infuse state of the art E&P technologies, investments and best-in class management practices.

"The objective of this policy would be to increase India's indigenous oil and gas production by maximising the potential of already discovered hydrocarbon resources in India," he said.

"We need global best practices and modern technologies to develop the sector. With this in mind, we have introduced landmark changes in the entire value chain of oil and gas sector," he said.