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We don't need more oil PDF Print E-mail
Wednesday, 27 June 2012 00:00
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Given the way GoI treats oil firms, it sure feels that way

It was precisely because India’s oil production was stagnating at around 30 million tonnes in the 1990s that the government decided to bring in private players in the mid-90s, the terms for this were later standardised under the New Exploration and Licensing Policy (NELP). While private producers are giving the state-owned ONGC a run for its money, part of this production, or exploration, is from pre-NELP rounds. But if you look at NELP rounds, which is how all fresh blocks will be given out for exploration and production in the future, they already account for around 30-40% of all gas production in the country—their contribution in terms of oil is negligible. A total of 31 NELP discoveries have declared commercial in-place oil reserves of around 31 million tonnes and around 660 billion cubic metres of gas—the rest of the 107 hydrocarbon discoveries under NELP are under various stages of evaluation and appraisal. The reserves in these 31 discoveries equal around 6 months production in terms of oil (based on current levels) and about 10 years of gas production. Not only is that significant, keeping in mind how the shale revolution has completely changed the US, and the global, energy balance—from zero in 1990, shale gas today accounts for over 20% of US domestic gas supply—the potential of new discoveries can be truly huge; till RIL began exploration, who thought the KG Basin could yield so much gas?

 

Which is why it comes as a shock, as FE has reported today, that the number of exploration wells drilled in NELP blocks has fallen from 60 for the NELP V rounds to zero for NELP VII to IX. The reasons for this vary. As FE reported in April, the government was sitting on Cairn India’s proposal to do more exploration which, Cairn and ONGC are confident will yield another 65,000 bpd of oil (leading to $15 billion more for government, in net present value terms, http://goo.gl/o1nZr). In three other Cairn blocks, FE reported last week (http://goo.gl/3zww9), the company had no option but to declare force majeure as it found it could not access its fields as they were part of a naval exercise range, an army firing range, and so on. One presentation made to the petroleum ministry says exploration spend in India for NELP rounds is down from $4 billion in 2007 to a mere $4.7 million in 2011. While some part of this is natural as firms move from exploration to production phases, surely with newer firms coming in this dramatic fall is problematic? Now that the Prime Minister has promised to take charge, this is an urgent priority area—one in which, incidentally, there cannot be any political opposition to any move he makes.

 

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