Open acreage licensing policy: the wait is on
Makarand Gadgil
Things seems to be finally moving on the Open acreage licensing policy (OALP) with four oilfield services companies submitting their bids for developing, building and operating National data repository (NDR) earlier last month. However, the country is still at least a year and half away from implementing the NDR. The OALP has been on the discussion board since 2005.
Companies that are in the race to build the NDR include Schlumberger, Haliburton, Fugro NV and Geoleader. “The initial time period for operating the NDR will be three years with the option of extending it. Setting up the NDR will help in shifting to open acreage licensing,” said acting-director general of hydrocarbons S K Srivastava.
The integrated data repository will help to identify hydrocarbon bearing areas which are not yet licensed out. According to figures available on the website of the directorate general of hydrocarbons (DGH), the upstream regulator, out of 3.14 million sq km of sedimentary area of country nearly 2.15 million sq km has been already given out for exploration in the eight rounds of New Exploration and Licensing Policy (NELP) so far. It is estimated that the country has oil reserves of 28 to 32 billion tonnes of hydrocarbons.
Petroleum secretary S Sundareshan said, “It will take at least a year to year-and-half before we can move to the OALP regime as the process of building the NDR is on.”
Under NELP, the country has so far attracted around US $10 billion as investment and a little over US $5 billion has spent so far. But none of the major global E& P players like Exxon Mobile, Chevron, BP and ConcoPhillips have come to India. By moving to an open exploration regime, the government hopes to attract the big boys of E&P.
Under OALP, there are no deadlines for bidding and it doesn’t push investors to bid aggressively in order to try and corner as many blocks as possible. It also offers freedom to the exploration company to choose the area, which is not there under NELP. And more importantly, each E&P company can take call on when and where to invest according its comfort zone.
“The new regime will shift the choice of bidding blocks from the government to the investor. This, therefore, will ensure better evaluation of the data by the investors to their satisfaction since there are no immediate bid deadlines to be met. This will also help the E&P players to make more meaningful offers for the blocks,” observed E&Y’s national leader for oil & gas practice, Ajay Arora.
Lack of quality data was one of the major hurdles in attracting big names towards India and the NDR is expected to ensure that standard format data is made available. If India manages to move to OALP it will join 20 other countries including U K and Canada.
“The availability of quality data, NDR and OALP framework are one set of pre-requisites for attracting the investment in country like India but more importantly stability of fiscal regime and hydrocarbon prospectively will play an important role in attracting investment in the country,” said international consultancy firm PricewaterhouseCoopers’ associate director Deepak Mahurkar. “Ideally blocks under OALP will be bid through competitive bidding and any company expressing interest first needs to be given some preferential treatment,” he added.
Arora also concurred with Mahurkar on the issue of consistency of fiscal regimes and said, “Stability of the fiscal regime with the government playing the role of a facilitator is a precondition for attracting investments in the E&P sector under both NELP and OALP.”
The Association of Oil and Gas Operators (AOGO) in its working paper on the OALP has underlined the importance of quality data in standardise format. It observes, “Companies are supposed to provide data to DGH, both for NELP, Pre NELP and nomination eras. While this requirement has been expressed in many forums, there is a belief that the implementation of this is far from satisfactory. Not only are there still issues to be resolved in terms of types of data and age of data, but also there are problems with nomination era data, analog era data, and not traceable data. Once again the time frame for getting repository going is an open question”.
Even if NDR is created, there are many areas for which no data or very little data is available and there are issues about the adequacy of data collected in the nomination era, so under OALP regime framework for reconnaissance bid also needs to be created, said AOGO’s secretary general Ashu Sagar.
However bidder who has bidded for reconnaissance bid eventually looses out on exploration bid then he can be compensated by standard cost reimbursement method or by giving some stake in the field, working paper suggests.
The working paper also recommends to create standardise grids to ensure areas of two different blocks do not cut in to each other by dividing all blocks in rectangular format and there should be cap on minimum and maximum size of all such rectangles.
ONGC’s S.V. Rao said, “although OALP regime is more friendly to E&P players, it won’t result in instantaneous queuing up of big international players as enough is known about India and only midsize companies like Cairn will continue to flock India”.
The key to success of the OALP is quality of data and confidentiality of the data acquired by the company during exploration stage, he added.
But there many sceptics, who wonder, whether ministry or DGH really want to move to OALP? as OALP means higher level of transparency and curtailing of discretionary powers in the hands of mandarins in both organisations.
They also feel that moving to the OALP regime will be partial and producing areas such as KG basin, Cambay basin and Bombay High will continue to be under the NELP regime. But non-producing basins and unexplored basins like the Cauvery basin and Andaman and Nicobar Offshore will be put under OALP.
Meanwhile, the wait is on in the E&P circles on when the DGH announces the result of the bids it invited for building the NDR and how soon work on the NDR gets started.
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