While the government has expressed its willingness to give more incentives to the global energy giants to encourage them to invest in oil and gas exploration in Indian territory, experts remained cautiously optimistic about the plan. They suggested more flexible work prgrammes, waiver of goods and service tax (GST) on capital equipment, and abolition of the “windfall tax” on crude oil, to boost investor confidence in India’s hydrocarbon sector.
At the conclusion of the 10th round of OALP (Open Acreage Licensing Programme) bidding recently, oil minister Hardeep Singh Puri told global oil biggies: “Today, we are much more in an inviting mode. If you want to (invest), we will incentivise that,” Puri had said at an industry event earlier. “Come and do your seismic (surveys). You don’t need to make a commitment.”
The latest OALP round saw 1,36,596 sq km of area, including earlier no-go areas having been offered for exploration. This was the largest area offered so far for 28 blocks in 8 sedimentary basins. In all, 60 bids were received of which 24 were from public sector companies, and 35 from private companies. The round saw relatively higher participation, and a joint bid by state-run ONGC and Reliance Industries.
One of the key agendas of the government has been to boost domestic production of crude oil, and thereby reduce the country’s dependency for energy. However, the domestic production of crude oil and natural gas has remained stagnant leaving India to import over 85% of its crude oil requirements.
“The government has been addressing reforms in the upstream oil and gas sector for several years now, to enable removal of roadblocks, policy uncertainty and facilitate better evaluation of risk, which has enabled the private sector and international exploration companies to look at the Indian E&P space more favourably. Case in points have been the Open Acreage Licensing Policy (OALP) and the National Data Repository (NDR) launched in 2017, enabling companies to carve out blocks of interest based on their analysis of geological data, which made the sector more attractive at that point of time” said Ashwin Jacob, Partner and Energy, Resources & Industrial Industry Leader, Deloitte India.
Additionally, introduction of the revenue sharing model made the exploration in Indian basins much more efficient and easier, amounting to lesser disputes. “That saw players like Vedanta coming in a big way,” Jacob said.
Even as the participation from the domestic private industry has gained traction in the exploration and production of oil, overseas companies are still reluctant to explore India’s basins.
“Not many overseas companies have shown interest in exploration in India. They are very picky about the regions or areas they want to go to,” said Prashant Vasisht, Vice President and Co-Head, Corporate Ratings, ICRA. “The government can be flexible on the minimum work programme. It can be flexible on SAED (Special Additional Excise Duty). That can be done away with. There can be GST not to be paid on capex etc because that is hard to recover,” said Vasisht. Geological surveys could be improved.
Jacob highlighted that international companies want abolition of windfall tax. “Naturally, the ongoing concern raised by international companies on the periodic imposition of windfall taxes, when crude oil prices cross certain thresholds remains. A more transparent and ‘formulaic approach’ will provide a much needed clarity and predictability to companies as they evaluate the risk-reward equation for specific upstream opportunities.”
The government, from 2016 has brought in several changes to enhance exploration of oil and gas blocks in the country and auction it by launching Hydrocarbon Exploration and Licensing Policy. Under HELP, Open Acreage Licensing Programme has been launched which provides investors the freedom to carve out blocks of their choice through submission of Expression of Interest (EoI).
The oil ministry has now introduced a Bill in Parliament to amend the Oilfields (Regulation and Development) Act, 1948 broadening the definition of mineral oils, which previously included only petroleum and natural gas. The updated definition now includes any naturally occurring hydrocarbon, coal bed methane, oil shale, shale gas, etc.
“This will enhance the ease of doing business prospects for the E&P sector. The bill when enacted will help to attract global investment in Exploration and Production in the oil & gas sector in India. The initiative aims to boost domestic oil production, addressing the rising energy demand and reducing import dependency of the country,” said Sanjay Sah, Partner, Deloitte India.
The government is now expected to come out with the bids for oil and natural gas assets under the tenth round of Open Acreage Licencing Policy in the beginning of 2025 and hopes to receive a greater number of participation from the private sector. Moreover, the government expects the contracts for the upcoming 10th round to be signed as per the reforms mentioned in the Oil (Regulations and Development) Amendment Bill, which is expected to be passed in the upcoming winter session of the parliament, as per a senior government official.
“It is expected that the impending Oilfields (Regulation and Development) Amendment Bill, when passed will be the next big step in improving the ease of doing business for an upstream operator, which should hopefully enable a more favourable assessment of the Indian upstream sector by investment committees of prominent players, both domestic and international, signaling increased confidence in India’s exploration landscape,” Jacob said.
From: financialexpress
Financial News
