8/11/2019 A Sorry State of Oil Exploraitons

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Oil Exploration firms grapple with overseas woe

India's oil and gas explorations face fresh hurdles. While New Delhi has never been able to attract

top multinational energy giants to drill in its territory, it is now scaring away even the few foreign

players which did venture here. The main reason is the delay in granting approvals for exploration

activities. Italian exploration major Eni SpA, Australia's Santos, and the UK-based Foresight Groupare among those looking to exit. Exploration work is stuck also at blocks awarded to the Australian

company, BHP Billiton Petroleum, and Canada's GeoGlobal Resources. In fact, bureaucratic delay

was the reason Norway's Statoil ASA and Brazil's Petroleo Brasileiro SA both cited when, in 2010,

they pulled out of a venture with state-run Oil and Natural Gas Corporation to develop a block in the

Krishna-Godavari basin, off India's east coast.

These companies came to India after winning blocks auctioned under the New Exploration Licensing

Policy (NELP), which ended state monopoly in oil and gas exploration. The policy was decided upon

in 1997/98 to boost local exploration and production work, and also attract foreign players.

Increasing local output is essential as India imports nearly 80 per cent of its crude oil needs. In

2011/12, India spent $140 billion (Rs 7.26 trillion; one trillion equals 100,000 crore) on oil imports,

up 40 per cent from the previous year.

NELP has not been very successful in attracting foreign direct investment (FDI) into the oil and gas

sector. The policy also has largely failed in luring global giants such as Exxon Mobil, Chevron, BP,

ConocoPhillips, and Royal Dutch Shell. The oil ministry does not appear to be worried about the

trend.

Because of regulatory delays BP could not buy 30 per cent stake in Reliance industries Ltd.s blocks.

Among the foreign firms which seem to be fed up of the delays is Eni SpA. The company plans to exit

all its three blocks. It also wants to sell its 47.16 per cent stake in the Mumbailisted Hindustan Oil

Exploration Company. Exploration work at a block near the Andaman and Nicobar islands was stalled

after the Department of Space said the block fell in the trajectory of the Indian Space Research

Organisation's rocket stage impact zone. A senior oil ministry official, who is privy to the

developments, said the ministry has taken up the matter with the prime minister's office (PMO).

Eni's block in Rajasthan is stuck as well. The block falls under a protected forest area, and Eni wasrequired to take permission from the Supreme Court to undertake exploration. The oil ministry

official said the company did not take the court's permission, and has also not made the minimum

investment required by its contractual obligations. The ministry is contemplating action against Eni,

which could include a penalty, the official added.

Meanwhile, Santos International Operations Pty Ltd is embroiled in a diplomatic row between India

and Bangladesh. Santos had won two blocks in the sixth round of NELP. These two blocks, in the Bay

of Bengal, cover an area of 16,500 sq. km, and both countries have claimed territorial rights in the

region.

8/11/2019 A Sorry State of Oil Exploraitons

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