INTERVIEW: Oil India CEO says price revival to attract global upstream investors

State-run Oil India Ltd. is exploring potential international partnerships in its quest to expand domestic exploration as a recovery in oil and gas prices has improved the upstream investment climate, the company'sChairman and Managing Director Ranjit Rath told S&P Global Commodity Insights in an interview.

Speaking on the sidelines of the India Energy Week, Rath said his vision is to allocate billions of dollars in capital expenditure to accelerate production from all Oil India upstream projects, while also making a strategic push for newer forms of energy.

"The upstream investment climate has improved, and this is the right time to speed up the process in India. I am open to explore international partnerships in various forms that can help push upstream output higher," Rath said.

Oil India is looking at collaborations with international companies to enhance production from its existing fields through technology service models and production enhancement contracts, he said.

Rath said that the government has proactively removed impediments for foreign participation in the upstream sector.

Highlighting some of the steps, he said India has set up a national data repository of reliable exploration and production data for the country with a provision for seamless access and online data management. In addition, India provides royalty concessions for early monetization and commercial production.

"With envisaged growth and continued policy reforms, we are expecting foreign participation in the near future," he said.

Diversified push

Oil India contributes about 10% of the Indian domestic crude oil production and 8.5% of natural gas output from its operated domestic fields.

Rath said that to enhance exploration opportunities in India for the yet-to-be discovered 29.8 billion mt of estimated oil and oil equivalent of gas, Oil India has expanded domestic acreages by actively participating in various biding rounds under the country's Open Acreage Licensing Policy. Oil India's operating domestic acreage has grown roughly sevenfold to 62,923 sq km, from 9,302 sq km in 2017-18 (April-March).

"The strategy of the company is to consolidate its position as the leading operator in the north eastern region and carry out exploration in Category-II and Category-III basins," Rath said.

"In addition to significantly increasing acreage in Assam-Arakan and Rajasthan basins, Oil India has also entered into Category-II and III basins via Andaman, Kerala-Konkan and Mahanadi Basins. We are the sole operator in Mahanadi on land and Kerala Konkan offshore," he said.

The company is also evaluating blocks offered under a special coal bed methane (CBM) round of 2022. The round had 16 blocks on offer with a total area of 5,817 sq km. Currently, 90% of potential CBM resources are still untapped.

"We have already entered into a non-binding agreement with Galilee Energy Limited of Australia for bilateral cooperation in CBM exploration," he said.

Rath said that about Rupee 200 billion ($2.42 billion) has been set aside for capital expenditure until 2025-26 (April-March) to meet the company's targets under exploratory and development efforts and infrastructure development, including overseas investments in existing blocks.

Oil India also has plans to enhance its annual gas production to 5.0 billion cu m by 2024-25 that would almost double its output from 2020-21. The plan is aligned with the government's target to raise the share of natural gas in the country's energy mix to 15% by 2030, from 6.3% currently, he said.

Rath said Oil India has already forayed into the renewable energy domain with the commissioning of a wind energy power project in Ludurva, Jaisalmer, Rajasthan. Oil India so far has established a total of 188.1 MW -- 174.1 MW of wind and 14 MW of solar -- capacity in the states of Rajasthan, Madhya Pradesh, and Gujarat.

Oil India has also commissioned a green hydrogen pilot plant of 30 kg/day capacity in Jorhat Assam, Rath said.

Lessons from Russian-Ukraine war

The Russia-Ukraine war has shown the world how dependent the global economy is on oil, gas, and coal for energy security, Rath said.

"Global capital spending in upstream oil and gas continues to recover. We expect a year-on-year increase of 10% in 2023 to around $470 billion, which would be well above a cyclical low of $370 billion in 2020. However, around half of the increase this year would be inflation related," he said.

Some governments are offering the oil and gas industry new incentives to invest in supplies, he said. "The consequence is that global carbon emissions won't fall as rapidly as hoped in the immediate aftermath of COP26. They may hold up longer as economies navigate through the crisis."

Global oil demand continues to recover from COVID-19 lows in 2020, according to Rath. "But once past the current recession risk, what will the trajectory of demand in a world that's decarbonizing and how will that influence oil prices, this is still quite unpredictable as dynamic geopolitical turbulence is playing a big role for the time being instead of technology disruptors," he said.