Small oil, gas field bid extension raises questions over auction response

KOLKATA (miningweekly.com) – The Indian government has extended the bid submission deadline for the auctioning of 67 marginal oil and gas fields, which may be an indication of a poor response to the auction.

While officials in the Oil and Natural Gas Ministry declined to comment on the response to the auction, an industry source has said that shifting the October 31 deadline is an indication that responses have been poor or that the valuations submitted fell below government’s expectations.

The bid round for the small oil and gas fields has been extended to November 21.

At least two industry sources and one government official on condition of anonymity said that the extension would provide time for the government to make certain relaxations and/or consider sweeteners to the auction to woo domestic and international bidders to develop the 67 marginal oil and gas fields under a cluster of 47 contracts.

Mining Weekly Online had earlier reported that the Ministry was considering feedback from prospective bidders that the oil and gas fields up for auction were too small and that the government was considering an option of permitting successful bidders the rights to explore fields adjoining the ones already under auction.

At the same time, while the identities of companies that had put in bids were kept under wraps, government officials said that the deadline extension gave national oil exploration and production (E&P) major ONGC time to submit bids.

It was pointed out that ONGC had surrendered the 67 fields after it failed to develop them in a specified timeframe and that the company had found them to be unviable under former oil and gas exploration and development policies. However, ONGC was forced into a rethink following the unveiling of the new Hydrocarbon Exploration Licensing Policy (Help), in March this year.

The government has replaced the New Exploration and Licensing Policy, under which nine rounds of auction had been completed but the tenth round had been nixed to put Help in place.

Under Help, E&P companies will have the freedom to explore and extract any fuel they discover, including coal-bed methane, shale gas, oil or gas, without having to seek fresh approvals for each resource discovered. Developers will also enjoy pricing freedom for production from their respective fields, and under these circumstances the government expects ONGC to bid aggressively for the fields now on offer, officials said.

The Ministry’s optimism over ONGC’s participation in the ongoing auction stems from the fact that production from the national E&P’s existing oil and gas fields is falling.

During the quarter ending June 2016, ONGC’s crude oil production decreased to 6.34-million tons, compared with 6.48-million tons during corresponding quarter of the previous financial year. Gas production during the period was also down 5.6% at 5.49-billion cubic metres.