Right Data A Must for India to Entice Big Oil Players
NEW DELHI (Dow Jones), Oct. 9, 2009
India appears to be writing itself off as an attractive oil and gas investment opportunity, even before a Monday deadline for bids on 80 blocks.
Seven previous bidding rounds have been characterized by a near absence of big foreign players, and despite some large offshore and onshore finds in recent years, there is some pessimism in Delhi that when bids are revealed Oct. 12, it will be any different this time.
Officials are pinning the blame on the global financial crisis, trouble between Indian economic moghuls -- the Ambani brothers -- and on global oil and gas majors failing to take proper notice of discoveries of large crude deposits by, among others Cairn Energy PLC and gas by Reliance Industries Ltd. Another factor is competition from other countries that are offering blocks to investors.
"Data room visits have not been as good as during the last round," V.K. Sibal, head of upstream regulator, Directorate General of Hydrocarbons, said last week. "If we get two bids on average per block, it will be great."
Sibal said that so far, data packages worth INR120 million to INR130 million had been sold, much less than the last round, held in December 2008, when it signed contracts for 41 blocks.
Since Aug. 8, it is promoting a further 70 oil and 10 gas blocks offered in the latest New Exploration and Licensing Policy round, hoping to raise nearly $3 billion.
India is heavily dependent on energy imports to keep its economy moving, and needs investment to exploit existing reserves and to find more. It imports about 75% of its annual crude oil needs, and spends almost one-third of its total import bill of $288 billion on crude.
The government also invites bids, in a similar pattern, for exploration to extract gas from between coal seams, known as coal bed methane.
The administration says that while interest among Indian companies has been satisfactory, that's not the case with big foreign players.
"Small and medium companies, including players like Hess Corp. and Noble Exploration, have shown keen interest," Sibal said, adding that big global players appeared less eager.
Oil Secretary R. S. Pandey has said that major global players seem more interested in proven blocks than exploration.
PricewaterhouseCoopers Associate Director Deepak Mahurkar offered an alternative interpretation: "Big players would come if sufficient data were available and if they found synergies with their overall business...they take their own call on technical and business grounds, not just on the basis of what statutory authorities say."
"There are just too many blocks on offer. It is obvious that many blocks will have a no-show," he added.
The Directorate General of Hydrocarbons' Sibal and others attribute the lack of interest to the global financial crisis and ongoing legal battles between the Ambani brothers.
The Mukesh Ambani-run Reliance Industries has been embroiled in a three-year bitter legal dispute over natural gas with Reliance Natural Resources Ltd., run by Mukesh's estranged younger brother Anil.
"The infighting...obviously affects sentiment," R. S. Sharma, chairman of India's biggest state-run exploration company Oil & Natural Gas Corp. said recently.
Deloitte Senior Director Kalpana Jain said the issue is more one of inertia among global investors: "India's recent track record has been good. Improve data quality and have sound statutory norms. It will take a few more rounds for big players to take India seriously,"
Of course, India isn't the only country with oil and gas blocks on offer. It faces competition from countries with huge proven reserves, including Iraq and Venezuela, which aren't faring any better in their block auctions.
In June, an Iraqi round was a near failure, with only one contract being signed (Thursday), and Venezuela has postponed until early next year bids for rich, heavy crude blocks in the Orinoco region, saying conditions aren't ripe for a successful round.
Copyright (c) 2009 Dow Jones & Company, Inc.
- India Plans Larger Oil Auctions as Modi Pursues Import Cuts (Sep 14)
- Cairn Energy: SNE-5 Appraisal Well Hits Oil, Gas (Mar 07)
- AkerBP, Cairn Energy Make Jefferies Top Pick List (Jan 09)
Company: Hess Corporation more info
Operates 4 Offshore Rigs
- Hess: World Needs New Offshore Oil Investments to Avoid Shortages (Sep 28)
- Hess Slashes 2017 Capital Budget After Quarterly Loss (Jul 26)
- Suriname Signs Offshore Oil Deals with ﻿Exxon, Hess and Statoil (Jul 14)
Company: ONGC more info
Operates 36 Offshore Rigs
Manages 8 Offshore Rigs
- Sources: India ONGC Strikes 'Good' Offshore Oil, Gas Find (Sep 20)
- India To Acquire Seismic Data Of 48,000 Line kms To Boost Oil, Gas Output (Sep 12)
- Biggest Indian Explorer Is Said to Plan First Ever Borrowings (Aug 10)
Company: Noble Corporation more info
Manages 28 Offshore Rigs
- Sembcorp Marine Delivers World's Largest Jackup Noble Lloyd Noble (Jul 18)
- Oil Industry Maintains Country Club Culture During Downturn (May 23)
- Freeport to Pay Noble $540 Million to Not Use 2 Oil Rigs (May 10)
Company: Reliance Industries more info
- OPEC's Output Curbs Squeeze World's Biggest Oil Refining Complex (Oct 16)
- India's Reliance Industries 2Q Profit Up 7%, Lags Estimates (Oct 13)
- India's Reliance Sells US Shale Asset for $126 Mln (Oct 06)
Company: Cairn India more info
- Sri Lanka Launches Tender To Develop Natural Gas Site In Mannar Basin (Feb 13)
- Mangala Field Hits 300 Million Barrels of Cumulative Production (Oct 20)
- Vedanta Wins Cairn Nod For BHP-Style Resources Conglomerate (Sep 13)