India mulls options to sweeten deals for marginal oil, gas fields

KOLKATA (miningweekly.com) – India’s Oil and Natural Gas Ministry is considering offering investors leeway to explore adjoining areas to the 67 marginal oil and gas fields already up for auction.

Faced with the challenge of securing positive responses from prospective bidders in a weak oil and gas market, the Ministry is trying to take cognisance of concerns raised at investor road shows, one being that the marginal oil and gas fields offered for contracts are too small.

Since the marginal oil and gas fields on the block are just a few square kilometres each, compared with hundreds of kilometres for most oil and gas fields, several prospective foreign investors have expressed concerns that the operations will not be of their usual scale.

Hence, the Ministry is considering its options regarding the adjoining areas around the 67 blocks, a government official said.

The 67 marginal oil and gas blocks have been combined into 47 contracts. Of these, 30 blocks are less than 25 km² and the rest less than 10 km².

Domestic and international exploration and production (E&P) companies have until the end of the month to submit their bids.

However, offering adjoining areas to investors is proving to be a challenge for the government. Officials pointed out that the marginal oil and gas field boundaries had already been demarcated and, since these were already discovered fields, government could come up against legal challenges if it changed the boundaries once the auction process had been initiated.

To avoid such roadblocks, the Ministry is talking to prospective investors seeking their view on opening up exploration of adjoining areas for exploration to winning bidders of the marginal fields once the current round of bidding is completed.

The idea is for winning bidders to enter into a fresh round of competitive bidding to explore the adjoining areas under the newly unveiled Hydrocarbon Exploration and Licensing Policy (Help) and avoid allocating the adjoining areas to winning bidders through preferential allotment.

The government has replaced the New Exploration and Licensing Policy (Nelp), under which nine rounds of auction have been completed but the tenth round had been nixed, to put Help in place. Under the latter, E&P companies will have the freedom to explore and extract any fuel they discover, including coalbed methane, shale gas, oil or gas, without having to seek fresh approvals for each resource discovered and that too under a composite revenue-sharing agreement.

Earlier, under Nelp and production sharing contracts, E&P companies that were successful bidders at auction, were allowed to recover costs entailed in developing the block, as approved by the government, and the government’s share of revenue was determined based on revenue generated from the block adjusted for developmental costs.