The Government of India awarded 44 Discovered Small Oil & Gas Fields to 22 companies under the new liberalized policy.

Last year the Government of India had put 67 discovered fields, clustered into 46 contract areas, on auction.  The discovered fields are estimated to hold together over 650 Million Barrels of Oil and Oil Equivalent Gas in-place reserves. The estimated recoverable reserves are of the order of 220 Million Barrels, around one-third of in-place reserves. They possess trapped resources worth $11 billion at current prices. These fields were discovered by National Oil Companies (ONGC and Oil India). But these discoveries could not be monetized due to various reasons such as isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime etc.  It is now planned to put them on production within next three years by awarding through the present competitive bidding route.

The fields were accordingly put on to competitive bidding last year. A series of roadshows were organized at the global oil cities- Houston, Calgary and Aberdeen and also at commercial centres at London, Singapore and Dubai to attract foreign investment into its discovered small oil and gas fields. Within India, the roadshows were held at Delhi, Mumbai, Guwahati and Bangalore.

Though the turnout at the roadshows were good,  initially there were apprehensions of poor response to actual bidding for these small and marginal fields especially as the timing of auction was not favourable to oil industry with low oil price. Based on feedbacks from interactive meets, significant relaxations in the bidding norms were made while biddings were in progress.  The following changes made the current bid round more attractive. 

First, the eligibility condition of bidder’s net worth at least matching with biddable value of work programme was removed. The Bank Guarantee of equivalent amount could be furnished in lieu of this.

Second, the winning bidder will not have to pay any amount for wells and facilities already existing at the well sites or within the field. These fields were discovered by ONGC and Oil India after extensive seismic surveys and drilling of exploratory and appraisal wells. The Government decided to offer the discovered fields to the contractors without seeking any reimbursement of expenses incurred till date on exploration or development of field and also without any upfront signature bonus for the value addition done by ONGC or Oil India. There will be no carried interest by National Oil Companies or State participation.

Third, as many of the blocks offered are located in the vicinity of the existing operating fields of NOCs, their existing facilities may be used by the winning bidder by paying service charges as already notified by the Government. . This will reduce capex and opex and also expedite monetization of the fields.

Fourth relaxation related to  waiver of requirement of submission Field Development Plan including in-place reserves, ultimate reserves, production profile, development wells, production facility, additional appraisal to be undertaken, etc. along with the bid.

These relaxation made the fields more attractive resulting in 134 bids for 47 fields in 34 areas. While one or more bids were received for all onland areas and 8 offshore areas, no bidder came forward for 12 offshore contract areas covering 20 fields. None of Oil Majors operating in India such as BP, Shell or India’s largest oil companies such as ONGC and Reliance showed any interest in these fields. But many other private oil companies viz. HOEC, Oilmax Energy, Adani Welspun Exploration, and Sun Petrochemicals emerged successful bidders. Cabinet Committee on Economic Affairs (CCEA) gave its approval to award contract in 31 contract areas covering 44 fields – 28 onland and 16 offshore.

Another significant breakthrough was interest shown by the entrepreneurs from non-oil sectors, looking for suitable opportunities to diversify into Oil & Gas sector by acquiring ‘Discovered Fields’.  As oil & gas has already been found in these fields, these blocks do not carry exploration risk. One can straight way develop and bring into production with a low capital investment, ranging between $5 million and $10 million. This can be a stepping stone for entry into large oil & gas sector, hitherto being seen as preserve of only large players. This bid round has seen 37 such new entrants, of which 15 have won the contract.

Considering the complexity of oil exploration and production technology, it would be advantageous for new players to rope in other E&P companies and prefer consortium/ joint venture rout with, a popular structure in oil industry to share high risk and reward. In the hydrocarbons industry, oil and gas assets are typically owned and operated by unincorporated joint ventures.

40 MMT oil and 22.0 BCM of gas in place is to be monetised over a period of 15 years. The successful bidders would have to start production of Oil/Gas within three years, as stipulated in the contract. Speedy environment and other statutory clearance would be needed. Some fields need fresh 3D seismic survey, data acquisition, processing and interpretation. Most of the fields require drilling additional development and appraisal wells. The field would need capital investment, to be mobilised, for drilling wells and field development on fast track to extract hydrocarbon. Bringing oil and gas on the surface within three years, say by 2019 end, is a challenge both for the promoters and the government.