KOLKATA (miningweekly.com) – India has received an investment commitment of $822-million in oil and gas exploration through agreements with successful bidders for 55 oil and gas blocks at the recently concluded maiden auction under the Open Acreage Licensing Policy (OALP).
Of the 55 blocks, Anil Agarwal-controlled Vedanta bagged 41 blocks, while national exploration and production majors, Oil India Limited and ONGC Limited, bagged two and State-run companies like GAIL India, Bharat Petroleum Corporation and Hindustan Oil Exploration Company were successful in securing one block each.
The exploration investments were committed in the course of the successful bidders signing a production sharing contract with the Petroleum and Natural Gas Ministry, government officials said.
The signing of agreements following an auction under the OALP is significant because the last round of oil and gas block auctions was conducted under older policy in 2010, in which 256 blocks were offered of which 156 have been relinquished by investors citing unviable prospects.
Following the signing of the agreement with the government, Cairns India, the oil and gas arm of Vedanta, said in a statement it had planned an investment to the tune of $1-billion to bring the 41 blocks it had secured into production.
However, despite the investment commitments received in the course of follow-up auctions under OALP I, the government was concerned over the tepid response overall, particularly the absence of any foreign exploration and production companies.
Government sources said that feedback received from foreign investors indicated that some of the clauses in the bid document of OALP I had discouraged them from participating in the auction. One such clause was that any holding company securing an asset would need to seek government clearance if the company wanted to make structural changes in the block secured at the auctions, even though the OALP permitted bidders to carve out the block for exploration projects.
It was submitted to the Ministry that seeking clearance for any changes in the block would be an impediment in the case of any changes in the investing holding company in the case of mergers, acquisitions or change of ownership, which, in turn, might require changes in the structure of the oil and gas block secured.
However, no clarification was forthcoming on whether the Ministry was tweaking the bid document to take care of such concerns even as the government readied to start the second round of auction under the OALP.
Preliminary information on the second round, however, indicated a further fall in investor interest with only 13 submitting their expression of interests (EoI) to the Ministry. ONGC, which did not bid aggressively in the first round, submitted EoIs for 7 geographies, sources said.
OALP permitted prospective investors to carve out their own exploration geographies and once the investors carve out such areas based on national data repositories, other investors could join in once the bidding at the auction commenced.