Indian state firms allowed private help with old oil, gas blocks

By Nidhi Verma

NEW DELHI (Reuters) - Energy-hungry India will allow state-owned explorers to rope in the private sector to raise production from old fields as the world's third biggest oil importer strives to better exploit its hydrocarbon resources and cut dependence on foreign oil.

India is the world's third-largest oil consumer and buys about 80 percent of its supplies from abroad. Prime Minister Narendra Modi has set a target to cut India's dependence on foreign oil to 67 percent by 2022.

India is looking at raising production from "nomination blocks," or fields handed to state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd after independence, oil minister Dharmendra Pradhan said on Monday. The fields are both onshore and offshore.

The boards of ONGC and Oil India will be allowed to issue production enhancement contracts and bring in private players to drill some nomination fields, Pradhan said.

He said the current fiscal model was not supportive of raising output from nomination fields.

"Revenue was the priority at one point of time but now the government is of the view that the priority is to raise production," Pradhan told reporters at a function to launch the country's second licensing round under new rules.

India has offered 14 blocks under the latest auction and will offer another 23 fields, including five coal bed methane blocks, in the next round later this month. It hopes to launch two more rounds by December.

Pradhan also said India would offer higher incentives for production from old blocks in frontier or difficult areas.

So far, the key criteria for winning a block has been the higher revenue offered to the government from the oil and gas production. But the policy has not helped oil and gas output, which has been stagnant for years.

After the discovery of the Bombay High oil fields in 1974 and Bassein gas fields in 1976, ONGC has not been able to bring any new major fields into production in the last four decades.

India has also failed to draw interest from global oil majors in licensing rounds since 1990 even though the fiscal terms were eased. However, Royal Dutch Shell and BP later bought stakes from firms that had won drilling rights.

(Reporting by Nidhi Verma; Editing by Mark Potter)