INDIA DISCLOSES MORE DETAILS ON ACREAGE OPEN FOR BIDDING

India has disclosed more details about acreage and production sharing contracts (PSCs) offered in the fourth round of bidding this year (OGJ, Sept. 23, p. 17). Included in the latest offering are 72 blocks-39 offshore and 33 onshore-covering almost 1.25 million sq km in 17 sedimentary basins. Block areas range from 80 sq km to 93,000 sq km. India in a draft contract proposes PSC durations of 25 years from date of contract signature for exploration, development, and production of crude oil and

Dec. 23, 1991

6 min read

India has disclosed more details about acreage and production sharing contracts (PSCs) offered in the fourth round of bidding this year (OGJ, Sept. 23, p. 17).

Included in the latest offering are 72 blocks-39 offshore and 33 onshore-covering almost 1.25 million sq km in 17 sedimentary basins. Block areas range from 80 sq km to 93,000 sq km.

India in a draft contract proposes PSC durations of 25 years from date of contract signature for exploration, development, and production of crude oil and associated gas. One 5 year extension is allowed.

For nonassociated gas development, PSCs terms may be as long as 35 years.

Other draft PSC terms allow:

Optional collection, processing, and interpretation of seismic data during the first exploration phase.
Sharing of oil and gas profit based on posttax rates of return or multiples of investment recovered.
The government to buy the company's share of oil at international prices in lieu of the company's right to export its entitlement.

Signature or production bonuses, royalty payments, or minimum spending commitments are not required by the draft PSC.

Upon signing of a PSC, the Indian government will retain a 30% carried interest, convertible to working interest after a decision to develop and produce hydrocarbons.

Deadline for bids on fourth round acreage is Feb. 22, 1992. They are to be submitted to the exploration secretary of India's Oil and Gas Ministry. Information on each basin included in the fourth bidding round may be obtained from India's Oil and Natural Gas Commission (ONGC) in New Delhi.

Companies making offers on more than one block will be required to submit each bid separately.

A management committee chaired by the Indian government and composed of as many as five members each from government and the PSC company will be formed to oversee operations on each block.

The operator of each PSC area will be assigned by a separate operating agreement between contracting companies and the government. Under circumstances to be negotiated, ONGC or Oil India Ltd. (OIL) may assume operatorship.

AREAS OFFERED

Of the 17 basins included in the fourth 1991 bidding round, the largest contiguous area offered is 12 offshore blocks covering more than 329,000 sq km in the Kerala Konkan basin off the country's southwest coast.

Eleven offshore blocks covering more than 121,700 sq km in the offshore Andaman basin are being offered around the Andaman Islands between the Bay of Bengal and the Andaman Sea.

The largest onshore area is 160,800 sq km on seven blocks in the Ganga Valley basin of northern India. Included are five blocks in North Central India covering 136,800 sq km in the Vindhyan basin.

Indian oil officials estimate the resource bases of:

Kerala Konkan basin at about 7.5 billion bbl of oil equivalent (BOE).
Andaman basin, 1.5 billion BOE.
Ganga Valley basin, 1.68 billion BOE.
Vindhyan basin, 3.2 billion BOE.

The Indian plate and surrounding ocean hold 19 sedimentary basins with a total area of more than 1.78 million sq km. Oil and gas development in India has been reserved for the public sector. ONGC and OIL head exploration, development, and production efforts.

ONGC in fiscal 1990-91 produced 225 million bbl of oil and 582 bcf of gas from Assam, Cambry, Cauvery, Krishna Godavari, Bombay offshore, and Kutch basins. ONGC estimates reserves at 38.5 billion BOE in its areas of operation, to which it expects to add 9 billion BOE in the next 5 years.

OIL produces about 22.4 million bbl/year of oil and 53 bcf/year of gas from operations in Assam and Arunachal Pradesh states. The company is exploring onshore areas of the Rajasthan and Ganga Valley basins, onshore and offshore Mahanadi basin in Orissa state, and offshore in the Andaman and Saurashtra basins.

In its areas of operation, OIL has found more than 3.7 billion bbl of oil in place and about 6.18 tcf of gas in place. In the next 5 years, OIL officials expect to add reserves of about 750 million bbl of oil and of 1.77 tcf of gas.

PSC DETAILS

At commencement of a PSC, the government may acquire a 10% working interest in addition to its 30% carried, convertible interest. On blocks where it acquires working interest up front, the government will pay its share of exploration costs.

India's draft PSC requires bidding companies to propose minimum work commitments during each of three phases of an exploration period of as many as 7 years. Bids are to specify areas to be covered by seismic surveys and the number of exploratory wells planned, including target formations and expected total depths.

One exploration phase can exceed 2 years, but none can exceed 3 years. Seismic data may be collected during the first exploration phase, not to exceed 2 consecutive years on offshore blocks and 3 consecutive years onshore.

At the end of the first exploration phase, a company choosing to proceed to phase two exploration will be required to relinquish 25% of the original block area, retaining 75% in as many as three simple geometric shapes. Each portion forfeited must contain at least 10% of the original area in a simple geometric shape.

A company at the end of phase two choosing to enter the third commitment phase will be required to relinquish another 50% of the original area. Again, each portion relinquished must contain at least 10% of the original area in a simple shape.

At end of last exploration phase, the company may retain only areas where hydrocarbons have been discovered and for which it has drawn up development plans.

Indian officials say work is expected to begin within 6 months of PSC commencement. PSCs may be canceled after the first or second exploration phases if minimum work obligations have been fulfilled.

India requires foreign companies to pay a corporate income tax equal to 50% of taxable income arising from a PSC. Indian companies pay taxes based on provisions of India's Income Tax Act of 1961. The government of India will permit repatriation of all funds due to a company under a PSC.

Companies with PSCs will be required to use Indian goods and services subject to quality, availability, and prices. They also must give employment preference to qualified Indian nationals and provide appropriate training programs. However, foreign company imports for operations under a PSC will be exempt from customs duty.