Stricter monitoring for Indian oil and gas companies

KOLKATA (miningweekly.com) – The Indian government has announced the appointment of two ‘super’ committees to monitor the operations of national oil and gas exploration and production (E&P) companies.

The committees, which will be above the level of the national oil companies’ boards, will be able to force State-owned exploration and production companies to relinquish fields and subsequently put them up for fresh auctions.

“The decision on the review committee shall be implemented immediately by the oil companies and progress reported to the Directorate General of Hydrocarbons (DGH) at its next meeting,” DGH chief Atanu Chakraborty said in a statement.

The directive to set up the monitoring committees to oversee ONGC and Oil India Limited (OIL) followed government’s assessment that the national oil companies have been tardy in implementing projects in line with targets to ramp up domestic oil and gas production.

The proposed committees will comprise representatives from the respective oil companies, two members of DGH and the heads of the oil and gas assets under review. The directorate general of DGH will head both the committees.

The committees will be able to order ONGC and OIL to relinquish any assets allocated through the nomination route if these assets are not monetised within “appropriate and feasible timelines”, and put the same assets up for auction for development by private domestic and foreign E&P majors. This option will also be applicable in cases of ‘ageing’ assets that ONGC and OIL have failed to optimise by adopting newer technologies.

Weak oil and gas production in 2016/17 is said to be one of the trigger points for the perceived stringent oversight, with output having fallen by 20% year-on-year to its lowest level in five years at 68-million tons of oil and gas, while imports rose by 83%.

As much as two-million tons of oil equivalent production were lost during the year, owing to ageing fields under national oil companies and a lack of technology to leverage ageing assets, according to government estimates.

The move to force national oil companies to relinquish assets that are ageing or facing time overruns is also in line with government’s decision to incentivise the introduction of newer technology.

Mining Weekly Online reported last month that the Indian government was working on a proposal to offer upfront incentives including capital subsidy and liberal export norms for foreign oil and gas companies expected to participate in the newly unveiled open acreage hydrocarbon policy. The fiscal sops, or at least part of it on offer, could be linked to foreign oil and gas companies’ application of enhanced oil recovery (EOR) or improved oil recovery technologies in addition to primary extraction processes.

It is believed that if monitoring committees forced national companies to relinquish under-performing or under-monetized oil and gas assets, the latter would be put up for auction for private majors and thereby ensure faster adoption of new technologies for EOR processes, a government official said.