IS THIS A GOOD TIME TO LAUNCH A ROUND?

Vol 3, PW 1 (03 Feb 99) Exploration & Production
     

Talk to foreign oil companies and the answer is No.

Talk to Indian officials and the answer is Yes. Foreign oil companies rightly argue we are in a climate of lay-offs, shrinking exploration budgets, mergers and a general aversion to high-risk exploration.

"Oil companies in the US and in Europe are slashing New Venture budgets and even those that still have the funds are scaling operations right back. Lay-offs appear to be the order of the day", one contractor tells this report.

Another adds: "Timing is everything and, unfortunately the NELP round is very poorly timed. Most companies are in survival mode and in very serious trouble.

This is about the worst period in the industry's history since the 1986 price collapse". A third company adds: "By the time the May 18 deadline comes around (for submission of NELP bids) the man in charge of India in our company might have lost his job".

In stark contrast, India argues the current climate is good, particularly for companies who wish to acquire acreage "cheaply" in anticipation of a future rise in oil prices. Indian oil officials remind you that NELP allows for a maximum 8-year work programme and no minimum expenditure.

This, they argue, leaves the field open for a rise in oil prices. "Anything can happen in the next eight years", insists one official.

India is also keen to stress that - for the first time ever - the authorities are making the share of profit oil between contractor and government a negotiable item. This inevitably puts the contractor in a stronger position.

One government source admits: "If the price of a barrel was $20, we would not accept a 5% share of profit oil, but at $10, we wont have much choice if the contractor insists". A PETROWATCH SUBSCRIBER ADDS: "I predict that response to NELP will be largely from domestic Indian companies - many seeking to enter the industry for the first time, such as Indian Oil Corporation.

There will be one or two new foreign company entrants (Woodside is keen), but hardly any majors. It is unlikely that ONGC will bid for any deepwater blocks.

It has already "cherry picked" the best, and most majors know this. The remainder of the NELP acreage, with just a few exceptions has been offered previously in better economic times.

Hence I think there will be little response from majors".