Govt to launch delayed second round of oil block auctions on Monday

After months of delay, India will Monday launch the second auction of 14 blocks for prospecting of oil and gas in an attempt to raise domestic output to cut imports.

Officials said the Open Acreage Licensing Policy (OALP) bid round-II, with 14 blocks measuring 29,333 square kilometres in aggregrate area on offer, will be launched by Oil Minister Dharmendra Pradhan on Monday.

India had in July 2017 allowed companies to carve out blocks of their choice with a view to bringing about 2.8 million sq km of unexplored area in the country under exploration.

Under this policy, called open acreage licensing policy or OALP, companies are allowed to put in an expression of interest (EoI) for prospecting of oil and gas in any area that is presently not under any production or exploration licence. The EoIs can be put in at any time of the year but they are accumulated twice annually.

 

The blocks or areas that receive EoIs at the end of a cycle are put up for auction with the originator or the firm that originally selected the area getting a 5-mark advantage.

The two window of accumulating EoIs end on May 15 and November 15 every year. EoIs accumulated till May 15 are supposed to be put on auction by June 30 and those in the second window by December 31.

The first OALP round was launched in 2017 and bids came in by May 2018. EoIs for second round closed on May 15, 2018 and the blocks were supposed to be put for auction by June but the round was for reasons unknown delayed.

In the meanwhile, EoIs in the third window also closed on November 15, 2018 with as many as 11 blocks measuring 21,507 sq km and five coal-bed methane (CBM) blocks being sought for.

Officials said after the delay in putting on offer the blocks sought in second window, it was expected that blocks in second and third window would be put on offer together.

But the government appears to have gone with putting on offer only the 14 blocks sought in the second window.

The blocks on offer in OALP-II include one in deep waters of Krishna Godavari basin and five shallow water blocks - two each in Andaman and Kutch basin and one in Mahanadi basin. Eight onland blocks - four in Mahanadi basin, two in Cambay and one each in Rajasthan and Cauvery are on offer.

Officials said the 14 blocks are estimated to hold in-place resource of 12,609 million tonnes of oil and oil equivalent gas.

In the third window, EoIs have been put for one deepsea block in Mahanadi basin and one shallow water area in Kerala Konkan basin. Nine onland areas - three in Assam, two in Cambay and one each in Mahanadi, Rajasthan, KG and Bengal-Purnea basin have been sought.

In OALP-1, mining mogul Anil Agarwal-led Vedanta Ltd walked away with 41 out of 55 blocks bid out. State-owned Oil India Ltd won nine blocks while Oil and Natural Gas Corp (ONGC) managed to win just two.

State gas utility GAIL, upstream arm of Bharat Petroleum Corp Ltd (BPCL) and Hindustan Oil Exploration Co (HOEC) won one block each.

The 55 blocks have a total area of 59,282 sq km. This compares to about 1,02,000 sq km being under exploration prior to OALP.

Blocks are awarded to the company which offers the highest share of oil and gas to the government as well as commits to do maximum exploration work by way of shooting 2D and 3D seismic survey and drilling exploration wells.

Increased exploration will lead to more oil and gas production, helping the world's third largest oil importer to cut import dependence.

Prime Minister Narendra Modi has set a target of cutting oil import bill by 10 per cent to 67 per cent by 2022 and to half by 2030.

Import dependence has increased since 2015 when Modi had set the target. India currently imports 81 per cent of its oil needs.

The new policy replaced the old system of government carving out areas and bidding them out. It guarantees marketing and pricing freedom and moves away from production sharing model of previous rounds to a revenue-sharing model, where companies offering the maximum share of oil and gas to the government are awarded the block.

The government prior to this had been selecting and demarcating areas it feels can be offered for bidding in an exploration licensing round.

Under this, 256 blocks had been offered for exploration and production since 2000. The last bid round happened in 2010. Of these, 254 blocks were awarded. But as many as 156 have already been relinquished due to poor prospect.