Mighty as it is in terms of sedimentary area, hydrocarbon potential, and sheer market size, India does not occupy a position of like stature on the international oil explorer's chart.
Yet Indian government policy initiatives during the past i years have thrown the country open to foreign investment upstream an downstream. Strapped for cash, hounded by declining production and reserves, the government is leaving higher cost and higher risk exploration to foreign and domestic private sector companies.
Furthermore, India has approved majority capital holdings in the do"stream sector, invited bids on field reactivation schemes and speculative seismic surveys, and adopted attractive and flexible production sharing contracts to govern these agreements. A strong tradition upholding sanctity of law provides a solid guarantee that such contracts will not be broken or modified.
INDIA RESTRUCTURES
With great determination India is correcting western impressions of the country as a secluded, bureaucratic, semi socialist nation politically prone towards the Soviet sphere of influence.
The oil industry, nationalized in 1973, was considered the exclusive domain of state agencies Oil & Natural Gas Corp. and Oil India Ltd.
Now on top of the private sector opening, ONGC itself is being re established as a limited public company, its name changed late last year to Oil & Natural Gas Corp. Ltd. As part of the restructuring the company will issue 20% of its unmortgaged capital to the public while divesting certain oilfield service operations.
The pace of restructuring will partly be driven by outside pressure, for example the World Bank's recent decision to defer a $350 million loan, citing delay in implementing oil and gas sector reform packages agreed upon in earlier negotiations.
BIDDING ROUNDS
Despite acreage offerings in 1980, 1982, and 1986, India did not emerge as a fully fledged international exploration candidate until late 1991 with the launch of fourth round bidding.
Twenty nine companies bid on the 72 land and offshore blocks offered, and contracts were signed with five operator groups, including for the first time private sector Indian companies.
A data inspection room in Houston, opened during the fifth round ended Mar. 31, 1993, has been established to afford companies easy access to documents and to field queries on all current and future upstream and downstream offerings.
Twenty sixth round bids are being examined. In that round, concluded Dec. 31, 1993, for the first time foreign and domestic private Indian firms teamed up to bid on acreage.
Now India is already three bidding rounds further down the road, with seventh round promotions scheduled for Singapore, Houston, and London in late March early April 1994.
INTEREST GROWING
Despite an abundance of E&P opportunities on offer, worldwide preliminary information indicates stronger interest than in any previous round. Foreign companies are realizing that the gigantic domestic market, the overall stability, and the government's commitment to economic reform spell long. term opportunity.
This opportunity is based on the very real urgency to come up with new reserves to match economic growth of 5%/year and the demands of a vast population. With 28 basins covering a sedimentary area of 1.4 million sq km onshore, 390,000 sq km on the shelf, and a further 400,000 sq km in deep water, drilling density averages only 12 wells/10,000 sq km.
Reserves stand at 5.178 billion bbl of oil and 16.294 tcf of gas as measured by Petroconsultants SA, Geneva. The government target is to double reserves during the next 10 years.
Not only has the government committed itself to successive acreage bidding rounds at two per year, but it has also offered field development projects, speculative seismic survey opportunities, and majority foreign capital investment in the downstream market.
DOWNSTREAM, GAS DEALS
In late 1993 major deals were concluded signaling the return to India after almost 20 years of Caltex Elf, and Mobil for manufacture and/or marketing of lubricants, while Castrol has boosted its stake to 51% and British Gas has entered a major agreement to pipe gas to industrial and commercial users in Bombay.
The development of natural gas has been given full policy commitment, while associated gas flaring will be reduced to a minimum.
The refining sector has been opened to private enterprise for the first time in more than 20 years, and the government has proposed to set up three 120,000 b/d refineries as joint ventures.
Meanwhile the number of private Indian companies emerging in all realms of the hydrocarbon sector has been equally impressive. Furthermore, foreign investors can be assured of a stable labor environment and an extremely proficient workforce of specialist oil industry personnel in all domains.
Oil production has slipped to 563,000 b/d in 1993 from a high of 674,000 b/d. Imports stand at more than 250,000 b/d. The population of 840 million relies on hydrocarbons for 40% of its primary energy requirements. It is a blessing that the figure is not higher since gigantic coal resources provide 65% of the total industrial energy consumed. Nuclear and hydro power supply the rest.
But energy demand growing at an estimated 3%/year, coupled to naturally declining oil production and a cut in C.I.S. supplies doubled India's import bill for crude and products to more than $3 billion in the first 6 months of fiscal 1993 94.
This comes at a time when a major shift in the country's oil and gas policy ONGC to trim its exploration program and focus on development and production from existing fields.
To put that in context, the 1992 93/1996 97 five year target calls for production of about 725,000 b/d. Yet liquids production peaked in 1990 at 674,000 b/d and has registered a steady decline to last year's 563,000 b/d. Almost two thirds of that comes from offshore fields, notably Bombay High, also in decline and for which enhanced oil recovery schemes have been solicited of foreign companies.
Incremental production during the field's remaining life is estimated at 130 147 million bbl.
ACREAGE, TERMS
The seventh licensing round, with a June 30 bid deadline, covers 45 blocks, of which 27 are onshore, 17 offshore, and one coastal tract that extends offshore in the Cauvery basin. The inventory includes 34 blocks carried over from the sixth and previous rounds.
Onshore acreage offered for the first time includes one block each in the Assam Arakan, Cambay, Rajasthan, Kutch, and Punjab basins. Previously unoffered tracts are in the Cauvery and Andaman basins; the on/offshore Cauvery basin block is a new nomination.
Terms governing the seventh round are as attractive as in the sixth round, with production sharing contracts modeled on agreements that resulted from the fourth round. Seismic option contracts are again available, and there continue to be no signature or production bonuses, no royalty, and no customs duty payment.
State participation is 10% in the exploration phase increasing to 40% once a commercial discovery has been made. All costs are expensed under the cost recovery provisions (previously there was a ceiling on allowable cost recovery of 90% of gross revenue).
Revenue remaining after cost recovery is termed profit oil that is divided between the state and contractors on a sliding scale determined by the field's profitability in any one quarter. The contractor's share ranges from 47.5% to 15% of the total profit oil (previously the share ranged from 100% to 30%. Income tax is paid by the state on behalf of the contractor out of state profit oil (previously it was levied at a rate of 50% and payable by the contractor).
OTHER PROJECTS
For the sixth round 20 bids were received for 12 of the 46 exploration blocks on offer. Nine foreign companies filed applications, and a dozen domestic participants, many in partnership with the foreign companies.
In another unprecedented development five foreign and four Indian companies, either alone or in consortia submitted bids for 20 of the 35 on/offshore tracts being offered for speculative seismic surveys. Twenty eight of the blocks available were initially offered for exploration in the fourth round.
All blocks will subsequently be made available for exploration by foreign and domestic private sector companies as part of India's ongoing licensing round process. The government has provided guarantees that each of the blocks win be opened for licensing through international tender in order to maximize revenue generating potential.
Meanwhile the government also hopes to boost existing field recovery factors through the launch in late 1993 of a global tender for the development of eight medium sized and 33 small oil gas fields.
And separately, ONGC issued an international tender for next phase development and improved recovery operations in offshore Bombay High complex on a profit sharing basis. Among the companies reviewing options on this complex are Amoco, ARCO, British Gas, Chevron, Mobil, Occidental, Total, and Unocal.