Hasten exploration, oil executives tell minister
A forum of chief executives of private oil marketing and exploration companies called on petroleum and natural gas minister Jaipal Reddy on Monday, requesting him to accelerate exploration in deep offshore and onshore sites to provide the much-needed energy security for the country. The delegation was led by Vikram Mehta, chair, Confederation of Indian Industry (CII) National Committee on Hydrocarbons, and chair, Shell Group of Companies.
During the interaction with Reddy, a delegation of CEOs belonging to the (CII) highlighted the need to reassess the policy framework and hasten decision-making. It suggested solutions to expedite investments in the sector and wanted that exploration companied were allowed access to state-of-the-art off-shore drilling technologies.
The delegation pointed out that lack of inter-ministerial coordination on policy and regulatory issues were significantly delaying oil exploration. The delegation stated that exploration blocks should be offered to interested firms.
“As exploration for hydrocarbons is a high risk business, it is important to not burden it with additional risk of fiscal uncertainty. Sanctity of the legally-binding contracts should be maintained. As for the prime issue of the seven-year 80IB tax holiday, there should not be any discrimination between oil and gas,” the CEOs told Reddy on Monday.
Urging for an independent upstream regulator, the CEOs told petroleum and natural gas minister Jaipal Reddy that it has been a long-standing demand of the companies. They wanted clear demarcation of the roles of the regulator and policymaker as it would pave the way for accelerating exploration, development and production projects in the oil and gas sector.
The forum, while reiterating the demand for ‘declared goods status’ for natural gas, stated that it would ‘avoid varying sales tax and value added tax, as levied by different states’.
“Transition to a gas-based economy with marketing and pricing freedom would give flexibility to manage technical and commercial risks, felt CII. The industry association pointed out that the proposed gas price pooling mechanism under Production Sharing Contract (PSC) can potentially distort price discovery,” said the delegation’s statement.
To invite and encourage global explorations companies to invest in Indian oil fields, the CEO’s forum said, “The quality of blocks must be addressed to maximise the exploration potential and ensure adequate returns. This would additionally encourage global players to invest.”
The CII delegation also called for transition to Open Acreage Licensing Policy (OALP) to further open up exploration. The current New Exploration Licensing Policy (NELP) is restricted primarily to blocks identified by the Directorate General of Hydrocarbons (DGH).
OALP could identify more prospects as sufficient data is already available. OALP can be done in two phases — the reconnaissance phase, to identify opportunities, and the Exploration phase, with back in rights for the initial explorer. However, a national data repository would need to be built for these blocks, suggested the CEO’s delegation.
India imports over 75 per cent of its annual crude oil requirement, with oil and gas accounting for nearly 45 per cent of India’s energy needs. The delegation pointed out that increasing indigenous production of oil and gas would enhance the energy security of the nation. “This can be achieved by accelerating exploration activity in deep offshore, unexplored offshore and onshore areas,” it said.
Through the NELP rounds, the government attempted to expedite the pace of exploration and also allowed 100 per cent foreign direct invest. However, despite its efforts, investments worth only $15 billion have been made so far after government auctioned 270 blocks.
While ruing that investments in the sector have varied from low to moderate, and global majors were not capitalising on India’s true potential, the forum pointed out that only 15 per cent of the 10.6 million square kilometre area was being explored, whereas the total area that could be harnessed was to the tune of 31.4 million square kilometres.
“The latest technologies for deep-sea drilling are yet to be deployed in India,” the forum pointed out.
Samiran Saha is Assistant Editor, Business with Tehelka.