 "After 15 years, only six Nelp blocks have started production")
Adding to the bleak state of affairs is the fact that from 2008 to 2012, the country has seen an investment of only $20 billion in the production-sharing-contract regime.
“The producing blocks include three by Reliance Industries (RIL) in KG-D6 (D1, D3 and D 26), a couple of blocks by Niko in Cambay and one block by ONGC, of the total 164 discoveries. Apart from this, all other blocks have comparatively lower reserves and are potentially not so feasible for production. Since many of them are gas discoveries, these companies may be waiting for a price rise for economic viability,” said a senior petroleum ministry official.
According to the ministry, the fifth, sixth and seventh rounds of Nelp exploration are set to be completed in 2014-15, and one should wait till then before giving a verdict on Nelp’s failure. “From 2008, there was a three-year holiday for these blocks, owing to lack of availability of rigs, as countries stepped up gas exploration in the wake of a rise in global crude oil prices,” the official said. Experts believe the number of discoveries with declaration of commerciality is very low.
While the first round of Nelp auctions offered 48 exploration blocks, the ninth round in 2012 offered 14. Together, all the nine rounds offered 302 blocks. Of the $20-billion investments recorded in the last five years, 2011-12 saw the least — only $1.86, billion due to a “ministry of defence embargo”.
“There is a sort of negative sentiment, as far as investors are concerned; a lot of clearances are needed at various stages. Indian blocks have comparatively lesser prospectivity. Therefore, the regime has to be reassuring for investors, with faster clearances. While the gas price rise, to be applicable from April next year, is one of the steps, more steps have to be taken. We should take steps to create investor confidence. While I was at ONGC, we tried to have tie-ups with many global majors such as Statoil, BP, Petrobras and ENI, but it did not work due to these sort of uncertainties,” said R S Sharma, former ONGC chairman and head of the Federation of Indian Chambers of Commerce and Industry’s hydrocarbon committee.
Of the 9,216 million standard cubic metres a day of global natural gas production, India’s share is only 1.26 per cent. Despite having about 3.14 million square km of sedimentary basins recognised as possible sources of oil and gas, India has managed to conduct moderate exploration in only 22 per cent of its sedimentary basins.
“It is a fact that Indian blocks are not so lucrative. In addition, finances are not available, as companies are struggling to raise debt for exploration activities since 2008. This is a serious concern,” said Kalpana Jain, senior director, Deloitte India.