India to Auction More O&G Blocks this Year
NEW DELHI (Dow Jones Newswires), June 4, 2010
India intends by the end of the year to launch a ninth round of auctions of oil and gas exploration blocks, as part of efforts by the world's second-fastest-growing major economy to boost energy output and trim its huge import bill.
S. K. Srivastava, head of the country's upstream regulator, said that the date for the auction, and the number of blocks to be offered, will be decided soon.
The round will be a test of renewed global interest in oil and gas exploration, after a dismal response in India's eighth round of auctions last October, although the country can draw encouragement from successful rounds held since then in Iraq and Venezuela.
India received bids for only 36 of 70 blocks offered in its eighth round, with global oil majors staying away due to lower crude prices, tepid global demand and scarce credit.
Also to be seen is whether the Gulf of Mexico oil spill disaster and expected tighter regulations and higher insurance costs will blunt companies' appetite for offshore drilling in India, or elsewhere.
"The process has already begun," Srivastava, Director General of Hydrocarbons told Dow Jones Newswires Thursday.
"We are seeking necessary government approvals and will surely launch the bidding round this year."
India has a sedimentary basin of 3.14 million square kilometers but so far only a third has been explored. India has set a target to complete exploration by 2015, aiming to cut a crude oil import bill that stood at $85.47 billion in the financial year ended March 31, with this accounting for about 31% of all its imports. India imports about 80% of its crude oil needs.
Before launching its auction rounds in 1999, called the New Exploration and Licensing Policy, India used to allot oil and gas blocks to state-run companies.
The upstream regulator has had encouraging meetings with potential investors, and has received suggestions on improving the process, which will be incorporated in the latest auction round, Srivastava said.
"We managed to attract investors during the tough time last year. Now that the market conditions are better, I expect the response will be much more better this year," he said.
Some analysts don't see investors rushing to India. "I see a medium weak response. The global oil and gas majors are still recovering from the financial crisis and a slowdown in demand," The Energy Resources Institute Fellow Ruchika Chawla said.
The International Energy Agency in May trimmed its 2010 world oil demand forecast and now expects demand to average 86.38 million barrels a day, a 220,000 barrel-a-day downward revision from April, and growth of just 1.9%, or 1.6 million barrels a day from 2009.
TERI's Chawla added that Supreme Court judgment in a gas dispute between Reliance Industries and Reliance Natural Resources in May, which ruled that the federal government has an absolute right over its natural resources and has the authority to decide prices and allocations, may also hurt investor appetite.
India also expects to start auctioning shale gas blocks over next two to three years, Srivastava said.
"The prospects seem good. We have to frame the policy now," he said.
Shale formations, or natural-gas-bearing rock formations, have become the jewel of U.S. energy resources as the technology to extract the gas has made it easier and cheaper.
India's oil ministry said March 31 that U.S. success in using shale gas to significantly augment its natural gas output could come handy in identifying such resources in India.
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