In this list
Energy Transition | Natural Gas | Oil

India unveils more oil blocks in upstream push but challenges ahead

Agriculture | Grains | Energy | Coal | Thermal Coal | LNG | Natural Gas | Oil | Crude Oil | Refined Products | Naphtha | Metals | Steel | Steel Raw Materials | Petrochemicals

Market Movers Asia, March 20-24: Chinese President’s visit to Russia in focus; oil, gas production outlook awaited

Energy | LNG | Natural Gas | NGL

Platts LP Gaswire

Energy | Oil | Energy Transition

APPEC 2023

Agriculture | Shipping | Grains | Biofuels | Dry Freight

Black Sea Watch: Ukrainian grain flows climb amid safe passage confirmation

Agriculture | Shipping | Grains

Australian wheat holds its ground amid Black Sea return to Asia

For full access to real-time updates, breaking news, analysis, pricing and data visualization subscribe today.

Subscribe Now

India unveils more oil blocks in upstream push but challenges ahead


New Delhi offers 26 exploration areas for bidding

Block uptake by potential investors will take time to realize: S&P Global

New technology can boost oil finding rates by drilling smaller number of wells

  • Author
  • Sambit Mohanty    Ratnajyoti Dutta
  • Editor
  • Norazlina Jumaat
  • Commodity
  • Energy Transition Natural Gas Oil

India has unveiled its latest upstream plans by offering more blocks for oil and natural gas exploration, but analysts told S&P Global Commodity Insights the industry is in urgent need of embracing new technology to use data more efficiently, while more incentives are needed to ensure private sector participation on an equal footing.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

New Delhi in early October offered 26 new oil and natural gas exploration areas for bidding, in sync with a strategy to cut crude import dependence. Out of the total blocks offered, 15 blocks are in ultra-deep water, eight blocks are in shallow water, while three are onshore.

"The Indian government's ninth bidding round is promising to an extent, given that 24 of the 26 blocks on offer have basins with reserves with production or contingent resources pending commercial production," said Nick Sharma, executive director for Upstream Solutions at S&P Global Commodity Insights.

"In addition, investor interest has also been kept in mind, with eight blocks being carved out as part of expressions of interest submitted by companies. However, the fundamental challenge of reducing crude import dependence remains, given any block uptake by potential investors will take time to realize," he added.

The latest rounds are under India's Open Acreage Licensing Policy, or OALP, under which companies are allowed to carve out exploration areas. Companies can put in an expression of interest for any area throughout the year. The areas sought are then put on auction.

The eighth round of the OALP was launched in July, and offered 10 blocks spread over 36,316 km. The winners of the OALP's eighth round have yet to be announced by India's hydrocarbons directorate, the upstream market regulator.

"Companies will need to rework the geological data to identify suitable prospects and drill them, followed by a path to final investment decision, which means that any expectations that crude import dependence can be bridged in the short to medium term, is going to be difficult to realize," Sharma said. "However, if a longer-term horizon is considered, then Category 2 and 3 basins could provide the necessary ingredients for exploration success."

The rounds of OALP auctions have been taking place under India's Hydrocarbon Exploration and Licensing Policy, or HELP, in force since 2016. HELP brought in an open acreage licensing policy allowing companies to offer expressions of interest in any area that is currently not under a production or exploration license.

"India's upstream sector has witnessed a series of reforms, and with investor friendly policies in place, the outlook for the country's upstream sector remains positive for the coming years," Gurmeet Singh, director general of the Federation of Indian Petroleum Industry, told S&P Global. "Domestic production of oil and gas is expected to increase by almost 10% over the next few years."

Policy push

The oil ministry said in late June that India would allow upstream operators to sell locally produced crude in the domestic market without restrictions starting Oct. 1, but restrictions on exporting locally produced crude would remain.

Under the previous policy, the operator of a field was not able to sell locally produced crude into the market directly and needed government permission for any sale of crude and condensate within the country. But under the new policy, the government would cease its function of allocating domestic crude and condensate output.

While this is seen as a positive step, the industry has bitterly complained about the windfall tax that New Delhi imposed on domestic production of crude oil, a tax imposed when companies earned above-average profits.

From July this year, New Delhi imposed a windfall tax of Indian Rupees 23,250/mt on the sale of domestic crude oil, but it has been gradually revised down as oil prices have softened.

"The government has been reducing the windfall tax with the decline in international crude oil prices. The reduction in windfall tax is a welcome move for E&P companies, as it will lead to higher realization of oil price for them and will help them in making more investments in the E&P sector," Singh added.

Challenges on technology

Rajesh Kumar Srivastava, chairman of state-run ONGC Ltd, told a recent conference that the country's oil and gas landscape would undergo radical transformation as de-carbonization plans accelerate.

"Exploring fossil fuels from geologically and technologically challenging frontier plays along with sustainable development goals with more focus on harnessing various renewable energy resources have become necessary to ensure our nation's energy security," he said.

He added that the global market value of automation technology in the oil and gas sector is projected to almost double and reach around $42 billion by 2030.

By switching to digital work instructions, oil and gas companies can build a huge bank of data simultaneously and use the information to predict when failure will occur. This is also expected to improve oil and gas finding rates by drilling even lesser numbers of wells, Srivastava added.