SINGAPORE (Dow Jones), Sept. 28, 2009
India hopes to raise nearly $3 billion in investment via its 2009 oil and gas exploration licensing round, but in future it may overhaul this annual auction system, resulting in operators having to pay more for blocks in more prolific regions, its top oil bureaucrat said Monday.
The government is mulling a change in its strategy of offering generous terms to exploration firms as it gets more confident of its prospects, especially in specific areas like the East coast which in recent years have been shown to hold huge reserves.
The Indian government is offering 70 blocks in its eighth round, which closes on Oct. 12, and is been trying to drum up international support at a series of meetings with potential bidders.
"What we are saying is -- these are the terms for this round only. It might change next year. So catch the bus when you can, don't wait for the next one," Petroleum Secretary R.S. Pandey told Dow Jones Newswires on the sidelines of a roadshow in Singapore.
The country is promoting exploration to try to cut its huge crude import bills, including by offering lucrative incentives like income tax exemptions to attract private and foreign firms.
"The current investment climate is challenging but India is offering some of the best terms anywhere; our prospectivity is very well established and we have a transparent process. We expect a strong response for this round because we are offering a great overall package," he said.
India is comfortable with current global crude oil prices as these help it keep fuel subsidies at a manageable level while also enabling it to pull in more foreign capital into domestic exploration, Pandey said.
The "$60-$70 range is good for us." If the price of benchmark light, sweet crude traded at the New York Mercantile Exchange "goes above or below that range, it starts to hurt either the producers or the consumers."
Nymex crude for November delivery was trading at close the $65.60 a barrel in afternoon trading in Asia.
Pandey also said the government will continue its last year's subsidy-sharing mechanism to insulate consumers from volatility in global crude price.
Gas Allocation, Pricing
The government will soon take a decision on allocating more gas from Reliance Industries Ltd.'s block in the offshore east coast Krishna Godavari basin to local consumers, with power and fertilizer units continuing to get priority, he said.
Reliance Industries has to sell gas from its massive D6 project in the KG basin in line with government utilization policy, which has so far allowed distribution of only 40 million standard cubic meters a day of gas.
The company has said it is unable to raise its output to designed capacity levels until the government approves more customers.
"An empowered government panel will soon be constituted to take the decision," he said.
Pandey said also that the government is considering a proposal to raise the price of gas controlled under the federal administrative pricing mechanism, which regulates most of the gas produced by state-run Oil and Natural Gas Corp. and Oil India Ltd.
Copyright (c) 2009 Dow Jones & Company, Inc.
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