The 46 contract areas spread across nine sedimentary basins hold an estimated 625 million boe of oil and gas. Out of a total of 67 small fields, 31 fields in 26 contract areas are onshore, 33 fields in 18 contract areas are located in shallow waters and three fields in two contract areas are in deepwater.
While five of the bidders were international, no major international or domestic companies participated in the auction and no bidders were found for 12 contract areas despite attempts by the Indian government to make the round more lucrative by offering tax breaks and relaxing its licensing policy. State-owned giants Oil India and ONGC had renounced them earlier this year, calling them uneconomical.
The authorities, nevertheless, hailed the auction as a success.
“The bid round took place in a challenging global market environment when the oil and gas prices have been volatile and the investment in the exploration and production sector has seen substantial decline,” the directorate said in a press statement. “Despite the above challenges, the response to DSF Bid round has been very favourable and exceeded [the] expectations of all experts.”
India is under pressure from a growing dependence on energy imports – according to the IEA, the country is set to be importing some 90% of its oil by 2040. The DSF bidding round, the first auction in about six years, is widely seen as both an attempt by the government to diversify its oil supply and as an opportunity to test a new licensing policy designed to counteract the effects of the global environment of low oil and gas prices.
While the previous 2010 auction took place under the New Exploration Licensing Policy, which was based on the production-sharing formula, the liberalised new Hydrocarbon Exploration Licensing Policy used in the current auction uses a revenue-based scheme that is meant to guarantee the full freedom of marketing and pricing on an equal basis. In addition, it provides for a single licence for conventional and unconventional hydrocarbons exploration, up to 100% FDI and various tax breaks including cut-rate royalties of 12.5% for onshore, 10% for shallow water and 5% for the first seven years for deepwater and ultra-deepwater development.
“This response despite low oil prices is testimony of India emerging as an attractive investment destination under [the] leadership of [the honourable prime minister],” India’s oil minister Dharmendra Pradhan tweeted.
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