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Dr Auriol Weigold
India's Petroleum Secretary, M.S. Srinivasan, said at a recent conference in New Delhi 'Now we are seeing, and the world is starting to believe, India is not under-endowed but only under-explored' (P. Williams, 'Oil and Gas Investor', May 2007).
As previously suggested 'India's recognition by the United States as a future nuclear-powered nation will not quickly ease its thirst for oil' (A. Weigold, 'India and Energy: A New Great Game', Asian Analysis, June 2006). Now that the Indo-US nuclear deal has collapsed over India's insistence on its sovereign right to test nuclear weapons in the future and its government's unwillingness to make the nuclear deal an election issue, the search for sub-continental oil and natural gas will increase in parallel with ONGC's overseas exploration through investment arm, OVL. The Ministry is presently engaged in ventures or joint ventures in Iran, Iraq, Libya, Myanmar, Russia, Sudan and Vietnam.
Following liberalisation in the petroleum sector in 1999, and the government's shift in foreign policy to encourage overseas as well as Indian companies to invest and explore, increased production has been the focus.
New fields are being developed with emphasis on frontier research such as deep water and other geologically and logistically difficult areas that require specialised technologies and the aid of international experts.
Indications of innovative planning are set out in a Ministry of Petroleum and Natural Gas draft strategy paper on the simultaneous exploration and production of coal bed methane with oil and gas, and comment has been called for by mid-October 2007. Scope for simultaneous operation and extraction exists in the Cambay Basin (Gujarat), Barmer Basin (Rajasthan) and Cauvery Basin (Tamil Nadu). It is technically feasible to do so, and the draft strategy paper canvasses the regulations that should be in place so that extraction could be carried out simultaneously by two different operators. For example, minimum distance between wells should be stipulated for safety and environmental reasons, as well as fiscal, legal and contractual issues.
One reality is that India will need enormous volumes of oil and gas to continue its growth. A second reality is that India's proven oil reserves will only last for twenty years at present rates of consumption. A third is that oil consumption will grow from its present 2.5 million barrels per day to some 3 million by 2010.
American exploration companies are the marketing target. Halliburton has been in India for some 30 years, its client base growing strongly since the 1999 liberalisation. The low number of American operators (and Australian) taking advantage of the freer exploration regime is striking. The perception, however, persists that India is a difficult place to work in.
A Houston-based management consultant firm, Seeta Resources, makes the contrary point that India is hospitable, that it is a democracy sharing similar legal systems to other western democracies, English is widely spoken and free speech is 'a pillar of Indian civics' ('Oil and Gas Investor' May 2007). With such advantages in place, the notoriously large and cumbersome Indian bureaucracy may be daunting but it should not deter foreign investors.
WATCHPOINT: In the latest round of acreage awarded under the New Exploration Licensing Policy (NELP), Santos has won two deepwater blocks in the North East Coast Basin in the northern part of the Bay of Bengal. Will this encourage other Australian oil and gas explorers?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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