India needs a licensing round for producing fields

Vol 8, PW 21 (26 Jan 05) Exploration & Production

Dont expect any of the international oil majors to bid for the 20 exploration blocks during the present NELP-V licensing round.

This round, like the four NELP rounds before it, will not see the rush of foreign oil majors that India so desperately needs to raise the profile of this hugely unexplored country. Despite the major deepwater gas finds by Reliance and the undeniable success of Cairn Energy, international oil companies are still reluctant to commit exploration dollars to India.

Why One reason is the poor quality of exploration acreage on offer. But another, more pertinent reason is Indias reluctance to offer discovered, producing fields to foreign companies.

According to one overseas exploration director, India must offer more discovered fields to international oil companies if it wants to galvanise interest in the countrys exploration sector. As a newcomer to India my first question is: How do I get production he tells this report.

If I had a producing field it would lower the pain of entry because it gives me an immediate flow of revenue that I can re-invest in exploration. Indias last licensing round for small and discovered fields was in 1993.

Among the notable success stories from that round is Cairns Ravva field, awarded then to Command Petroleum; the Panna, Mukta and Tapti fields, awarded to Enron and today operated by British Gas, Reliance and ONGC; and Hazira, operated by Niko with GSPC. Since 1993, all these fields have reported major upside in in-place reserves.

They have also enabled Cairn, Niko, and BG to tax-efficiently re-invest production revenue in exploration. Cairn, for instance, offsets the tax liability of exploration drilling in India against Ravva with the result that it can drill an exploration well for less than half the amount spent by a company with no producing field.