Owing to aversion to the revenue-sharing model, Multinational companies may skip auction though.
Having failed to woo multinational companies to invest in the country’s oil and gas sector in last two auctions under the New Exploration Licensing Policy (Nelp), the government was back trying to convince investors to re-look at the huge untapped potential in exploration.
Oil minister Veerappa Moily (pictured) met up with investors and the media ahead of 10th auction, scheduled in January. Moily stressed that since the beginning of 2013, the oil ministry has been trying to resolve several pricing, disputes and production related issues by policy changes.
He pointed out that the ministry was aware of several delays and other hurdles currently being faced by the explorers and was committed to improve the environment through actions like rapid clearance of upstream projects, deregulation of diesel, increase in gas price, shale gas policy, policy for integrated development and other initiatives.
Moily said 86 oil and gas blocks will be offered under the 10th Nelp auctions, of which around 53-55 blocks have been cleared by various agencies, while remaining would get approval before auction takes place in January. Moily also claimed that all major oil and gas companies including global giants had participated in the discussion ministry had on 10th Nelp auction on Monday. However, the names of parties that have shown interest to participate in the auction could not be fetched immediately from the ministry.
“India’s potential of conventional oil exploration is 406 million barrel a day and so far only 70 million barrel is exploited which is just 37% of the actual potential. There is a big scope for exploitation of 63%, we want investors, we want technology,” Moily said. He added that the government’s target of making India energy independent by 2030 was achievable.
Most analysts believe that like earlier Nelp auctions the next one may also get a tepid response from global giants like BP and Shell. While Indian public sector units and some private players are likely to participate, multinational would chose to keep away.
“The move towards revenue sharing model will make 10th Nelp auction less attractive and more riskier for explorer. They may not participate in the auction as revenue sharing model will not allow them to recover their risk capital,” an analyst from domestic brokerage said.
Under the current cost sharing model of production sharing contracts (PSC), through a specific formula explorers are first allowed to recover the capital and operating expenditure oil and gas revenues before sharing profits with the government. The move to revenue sharing model in oil and gas exploration contracts was proposed by finance minister P Chidambaram in his 2013 Budget speech.
“Investors have some reservation on revenue sharing. We want to have discussion with investors, we don’t want to impose it without consensus, we are seriously examining it,” Moily had said in an earlier conference with analysts and investors.
Moily also seemed determined to resolve certain other issues like its ministry’s on-going tussle with Reliance Industries (RIL) and exit of global giants like BHP Billiton. Moily stressed that government was confident of resolving the issue of bank guarantee with Reliance Industry within a fortnight. The bank guarantee was sought from RIL after it failed to deliver KG-D6 output as promised in PSC.
Moily also hinted that BHP Billiton has been convinced to not give up its nine exploration blocks and sort out issues with the help of state-owned Oil and Natural Gas Corp. Moily also declared that RIL will be able to take advantage of gas price hike as the ministry was determined to raising natural gas price from April 1.
“Absolutely, there is no question of reversing the decision to hike natural gas prices, as proposed by the Rangarajan panel report, or going back on the decision. All players will be included under the policy,” he said.
Having failed to woo multinational companies to invest in the country’s oil and gas sector in last two auctions under the New Exploration Licensing Policy (Nelp), the government was back trying to convince investors to re-look at the huge untapped potential in exploration.
Oil minister Veerappa Moily (pictured) met up with investors and the media ahead of 10th auction, scheduled in January. Moily stressed that since the beginning of 2013, the oil ministry has been trying to resolve several pricing, disputes and production related issues by policy changes.
He pointed out that the ministry was aware of several delays and other hurdles currently being faced by the explorers and was committed to improve the environment through actions like rapid clearance of upstream projects, deregulation of diesel, increase in gas price, shale gas policy, policy for integrated development and other initiatives.
Moily said 86 oil and gas blocks will be offered under the 10th Nelp auctions, of which around 53-55 blocks have been cleared by various agencies, while remaining would get approval before auction takes place in January. Moily also claimed that all major oil and gas companies including global giants had participated in the discussion ministry had on 10th Nelp auction on Monday. However, the names of parties that have shown interest to participate in the auction could not be fetched immediately from the ministry.
“India’s potential of conventional oil exploration is 406 million barrel a day and so far only 70 million barrel is exploited which is just 37% of the actual potential. There is a big scope for exploitation of 63%, we want investors, we want technology,” Moily said. He added that the government’s target of making India energy independent by 2030 was achievable.
Most analysts believe that like earlier Nelp auctions the next one may also get a tepid response from global giants like BP and Shell. While Indian public sector units and some private players are likely to participate, multinational would chose to keep away.
“The move towards revenue sharing model will make 10th Nelp auction less attractive and more riskier for explorer. They may not participate in the auction as revenue sharing model will not allow them to recover their risk capital,” an analyst from domestic brokerage said.
Under the current cost sharing model of production sharing contracts (PSC), through a specific formula explorers are first allowed to recover the capital and operating expenditure oil and gas revenues before sharing profits with the government. The move to revenue sharing model in oil and gas exploration contracts was proposed by finance minister P Chidambaram in his 2013 Budget speech.
“Investors have some reservation on revenue sharing. We want to have discussion with investors, we don’t want to impose it without consensus, we are seriously examining it,” Moily had said in an earlier conference with analysts and investors.
Moily also seemed determined to resolve certain other issues like its ministry’s on-going tussle with Reliance Industries (RIL) and exit of global giants like BHP Billiton. Moily stressed that government was confident of resolving the issue of bank guarantee with Reliance Industry within a fortnight. The bank guarantee was sought from RIL after it failed to deliver KG-D6 output as promised in PSC.
Moily also hinted that BHP Billiton has been convinced to not give up its nine exploration blocks and sort out issues with the help of state-owned Oil and Natural Gas Corp. Moily also declared that RIL will be able to take advantage of gas price hike as the ministry was determined to raising natural gas price from April 1.
“Absolutely, there is no question of reversing the decision to hike natural gas prices, as proposed by the Rangarajan panel report, or going back on the decision. All players will be included under the policy,” he said.
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