Global majors shun India oil, gas block auction – Reuters

Posted on March 29, 2011 by

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India failed to woo global players in its latest oil and gas exploration licensing round due to its poor track record of commercial discoveries and sluggish bureaucracy, with most of the 33 blocks going to domestic firms.

Asia’s third-largest economy needs private capital for exploration and is encouraging local firms to buy stakes in foreign oil and gas projects to meet its surging energy needs. India imports over 70 percent of the crude it uses and is keen to tap quickly domestic reservoirs.

Global oil firms are more inclined to invest in countries with higher prospects for finds, but some have paused when looking at India.

“India can be a difficult country to do business in. There’s the issue of bureaucracy,” said Sara Pourghorbani, an analyst at Wood Mackenzie for India.

“Bureaucracy actually seems to be quite a major issue for India. The pace of decision-making is quite slow,” she said.

Global oil majors stayed away from the auction despite surging international prices making even marginal oil and gas fields look more economically viable.

India’s largely regulated fuel sector, in which only petrol pricing is market-linked, also helped explain the lack of interest from international firms.

“Government still controls the price of (natural) gas. There is ambiguity over gas pricing,” said Alok Deshpande at Elaracapital.com.

“Traditionally global oil companies look for presence across the value chain which is not conducive in India.”

Monday’s auction largely drew interest from international companies that already operate in India such as BG, BHP Billiton and Cairn Energy.

Oil Minister S. Jaipal Reddy called the response to the auction “more than satisfactory” and “very encouraging”.

BP, which has just bought a 30 percent stake in 23 Indian blocks owned by Reliance, did not put in a bid. BG, with BHP Billiton, applied for and won only one block.

TIGHTENING SCRUTINY

India is competing with big oil-producing countries for exploration interest that could help it achieve energy self-sufficiency.

At the same time the government has had to tighten its regulatory scrutiny of projects to contain the political fallout from corruption cases.

Oil Secretary S. Sundareshan told reporters that contracts for the new blocks could be signed within three months.

Some 34 blocks were on offer under the ninth licensing round, but one shallow water block received no bids. Of the 33 blocks, eight are deepwater, six shallow water and 19 onshore blocks. The winning bids have to be endorsed by India’s cabinet.

Official data showed that foreign firms, including Deep Energy of the United States, had won five blocks, with the rest as in earlier auctions going to Indian firms.

A consortium led by India’s state-run explorer ONGC provisionally won 10 blocks and Reliance Industries won two.

In the previous eight rounds, ONGC and Oil India were awarded more that half of the 234 blocks offered.

India is currently producing around 720,000 barrels per day (bpd) of oil, mostly from fields awarded decades ago. That is less than a quarter of its 3.18 million bpd demand.

Proven oil reserves amounted to 5.8 billion barrels in or enough to satisfy its oil needs for only about five years, according to the BP Statistical Review.

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Posted in: India