BP Says India's Oil Sector Moving in Right Direction

HOUSTON (Dow Jones Newswires), Aug. 21, 2009

Despite some setbacks, the Indian oil sector is moving in the right direction and presents profitable opportunities for oil companies, a BP PLC executive said Thursday.

"This is the time when India is going to be building a gas-based economy," BP's country head for India, Shashi Mukundan, told a group of potential oil and gas investors in Houston.

India's energy industry, however, "is not for the faint hearted," Mukundan said. "India is evolving as an energy market. You need to have the patience to be part of it and help develop it."

The full-fledged development of India's oil and gas wealth will require $250 to $300 billion in investments, Mukundan said.

Mukundan was part of a delegation of Indian executives and officials participating in an Indian Ministry of Petroleum and Natural Gas road show for an oil, gas and coalbed-methane lease round. The participants sought to reassure international investors -- some of whom have shown reluctance due to the Indian government's grip on oil and gas marketing rights -- that India is a stable and profitable oil province.

The Asian giant, which relies on imports to meet a large part of its energy needs, wants to incentivize more domestic oil and gas production to fuel its booming economy.

The licensing round, the eighth since the country opened up its energy sector in 1999, comprises 70 oil and gas blocks, 24 of which are in the deepwater. There are also 10 coalbed-methane blocks being offered.

The government has offered a seven-year tax holiday for commercial production of oil and natural gas under these auctions. The last date for submitting bids is Oct. 12, and the contracts will be awarded about two months after the closing date.

Since its beginning over a decade ago, the liberalization of India's oil and gas sector has been "mixed," said BP's Mukundan. "But politics, the reform process, takes time. What's important is to look at the trend -- the trend is right," he said.

In Houston, the delegation received interest from 27 exploration and production companies, said Vivek Kumar Dewangan, director of exploration at India's Ministry of Petroleum and Natural Gas.  

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