Oil's Emerging Giant Beckons US Wildcatters Who Riled OPEC

(Bloomberg) -- The casualties of the U.S. shale bust are being offered a new frontier thousands of miles away in India to remake their fortunes.

Prime Minister Narendra Modi is striving to woo investors to develop already discovered but untapped smaller oil and gas fields that hold more than India’s total annual output. The South Asian nation depends on energy imports, a risk Modi is seeking to tackle as the fastest expansion among major economies turns India into a center of global oil demand growth.

"Entrepreneurs who have capped their wells in Alberta or North Dakota will be looking at this kind of a story with a greater amount of interest, as there’s very little to look forward to in their own fronts,” Atanu Chakraborty, the head of oil regulator the Directorate General of Hydrocarbons, said in an interview on Tuesday.

India isn’t fussy about who takes up the challenge -- whether foreign wildcatters or local internet tycoons looking to diversify their investments -- as long as they’re serious and have the money needed, Chakraborty said. The government is offering incentives such as simpler permits, tax sops and freedom from pricing restrictions to overcome the deterrent that low oil prices pose to boosting production.

For more on India’s surging oil demand, click here.

India’s robust domestic consumption is a buffer against the risk that prices "can fall again or will remain low," Chakraborty, 56, said in the interview in his office in New Delhi.

State-run Oil & Natural Gas Corp. dominates exploration and production in the South Asian nation. Faced with maturing large fields, the company has struggled to stem the drop in India’s oil output in recent years.

The $2 trillion economy imports about 77 percent of the crude and gas it needs. The 67 already-discovered small fields Chakraborty is trying to develop hold about 625 million barrels of oil and gas, the administration estimates. 

Foreign explorers such as Canada’s Niko Resources Ltd. and Edinburgh-based Cairn Energy Plc grew businesses in India after starting with smaller fields. At the same time, the companies have faced challenges ranging from arbitration spats with the government to tax disputes, underscoring the regulatory risks that some investors fear in India.


Chakraborty said he’s planning roadshows in North America, the U.K., Singapore and some Indian cities to drum up interest. Some executives who lost their jobs in the crude slump have shown interest in the fields on offer, he added.

"It’s a good idea to target the smaller companies, not just in the U.S., but globally -- they are aggressive and can definitely make a difference,” said Deepak Mahurkar, leader for the oil and gas team at PricewaterhouseCoopers in India.

Saudi Arabia led the Organization of the Petroleum Exporting Countries’ response to the U.S. shale boom by sustaining production, opting to defend market share and drive out higher-cost producers rather than cut output to tighten the market. Prices then tumbled, turning the American boom into a bust.

"We’re looking at people who are able to take risk intelligently," Chakraborty said. "Those are the kind of nimble entrepreneurs we are looking at. Four to five years down the line, we’ll have at least four to five good companies who would be in a position to take on larger risks."

India is expected to surpass Japan as the world’s third-largest oil user this year, the Paris-based International Energy Agency estimates. The country will be the fastest-growing crude consumer in the world through 2040, according to the IEA, adding 6 million barrels a day of demand, compared with 4.8 million for China.


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