Exploration and Production in India

India is heavily dependent on imports to meet the growing demand for petroleum products and possesses an annual average growth rate of between 6-7% compared to a world average of 1.54%.  The country is currently the 11th largest consumer of oil/gas and forecast to be the fifth largest consumer within the next 20-years. Oil consumption is expected to grow rapidly from a current level of 2 million bo/d to 3.2 million bo/d by 2010 and with the country responsible for importing around 70% of its hydrocarbon requirements, the Government recognised the need to adopt a comprehensive approach to tackle its energy security needs and embarked on a programme to overhaul dramatically the petroleum sector in the mid-1990s.

Realising that an increased level of exploration activity supported by large scale capital investment was necessary to expand domestic exploration and production, the Government drafted an internationally competitive fiscal regime and formulated the New Exploration Licensing Policy (NELP). Approved in February 1997, many of the privileges of the two national oil companies were removed in an attempt to develop a more competitive environment in the hydrocarbon sector.  As a result, ONGC and OIL had to compete with private sector companies to obtain exploration licences (as opposed to receiving them on a nomination basis) and with no compulsory state participation, a level playing field was provided for the first time between private and public sector companies.

A fast-track approval mechanism was also established to help accelerate and streamline the licensing process, thereby removing the prolonged bureaucracy that had long been associated with contract signature. The outcome has been highly successful: since the launch of the First Licensing Round under the NELP in January 1999, four further rounds have been concluded, giving rise to 110 contracts (40 deep water, 32 shallow water and 38 onshore) being awarded over the last six years compared to only 22 contracts in the preceding ten years.

As such, India has been rewarded with a number of significant gas discoveries in recent years which could potentially transform the country’s energy landscape.