Some companies interested in small discovered fields being auctioned by the oil ministry are keen to explore adjoining areas also but government officials say they can expand their exploration area subsequently with a competitive bid under the new licensing policy.
The government is seeking investors for 67 small oil and gas fields in an auction that is underway and allows participants until October 31 to place their bids. The government is hosting roadshows in India and key global financial centres such as London and Singapore to showcase the opportunity these fields offer and explain in greater details the nuances of the new policy governing these fields.
Some of the potential investors have raised concern about the smaller size of the contract areas on offer and urged the government to consider offering a bigger area. “The area being offered is too small. That limits our opportunity,” said a top executive at an oil firm seriously considering a bid. The private sector executive has been involved in the country’s oil and gas sector for two decades and said the contract areas offered under previous bid rounds were in hundreds of square kilometres while in this it is mostly just a few square kilometres, making it less attractive.
On the other hand, officials say that a proven field cannot be considered less attractive than a bigger exploration area where oil and gas has not been discovered. About 40 of the 67 fields being offered are less than 25 square kilometres in area. Nearly 20 are less than 10 sq km with one field being as small as 2.35 sq km. All 67 fields have been grouped in 46 contract areas that are being auctioned.
A senior oil ministry official said some investors have indeed raised this concern but the government will not be able to do anything about it. “We can’t make any changes in the way the fields have been marked or are being offered. Investors should understand that these are discovered fields and not exploration fields.
Bigger areas are offered when exploration blocks are auctioned,” said the official. The additional areas surrounding these discovered fields will be auctioned in future separately for exploration under the government’s new exploration policy, Hydrocarbon Exploration and Licensing Policy (HELP), the official said. “The winners of these discovered small fields can participate in that HELP auction and expand their area of operation. They will probably be better placed to offer more accurate bids as they would have superior access to data in those areas,” he said.
Government officials are travelling from Singapore to Dubai, Houston, London and Canada to attract bidders for these small fields, which have been lying idle for decades after discovery by state-run Oil and Natural Gas Corporation and Oil India Ltd. Last year, the government took away these fields from state firms and brought out a new policy to auction these to private players. The new policy allows contractors the freedom to market natural gas and cuts out bureaucratic micromanagement by introducing revenue-sharing between companies and the government.