Vedanta, ONGC, Hindustan Oil Set To Bag Oil Blocks Through Open Acreage Auction
Anil Agarwal-led Vedanta Ltd. is likely to bag as many as 40 oil and gas exploration blocks in India’s maiden open acreage auction, official sources said today.
An Empowered Committee of Secretaries has cleared award of blocks offered in Open Acreage Licensing Policy-1, the bidding for which closed on May 2, they said.
The recommendations of the panel will now go to ministers of finance and petroleum for approval, they said. The Union Cabinet had in April delegated its power to ministers of finance and petroleum to award oil and gas blocks to their winners in the OALP auction.
At the close of the bidding on May 2, Vedanta’s oil and gas arm, Cairn India, had bid for all the 55 blocks on offer while the state-owned Oil and Natural Gas Corp had bid for 37 blocks either on its own or in consortium with other state-owned firms. State-owned Oil India Ltd. bid for 22 blocks in a similar fashion.
Sources said while Vedanta is likely to walk away with 40 blocks, ONGC may get two or a maximum of three areas. Hindustan Oil Exploration Co. is likely to get one while Oil India may get half a dozen blocks.
When the bids closed on May 2, Vedanta was the sole bidder for two blocks and had either ONGC or Oil India as a direct competitor in the remaining. Except for the two blocks that received three bids each, the other 53 had just two bidders.
The source said the award of the blocks is awaiting the finance minister’s nod.
Piyush Goyal is officiating as the finance minister as Arun Jaitley recuperates from a renal transplant. It is being speculated that Jaitley may be back in office as early as next week and may clear the OALP-1 bids.
Neither local giants Reliance Industries nor any foreign company participated in the auction, a first since India began offering oil and gas area for exploration and production through bids in 1999.
India had in July last year allowed companies to carve out blocks of their choice with a view to bringing about 2.8 million square km of unexplored area in the country under exploration.
Under this policy, companies are allowed to put in an expression of interest for prospecting of oil and gas in an area that is not under any production or exploration licence.
The expressions of interest can be put in any time of the year but they are accumulated twice annually.
As many as 55 blocks were sought for prospecting of oil and gas by prospective bidders, mostly by state-owned explorers, ONGC and Oil India, and private sector Vedanta by the end of the first expression of interest cycle on Nov. 15, 2017, they said.
The blocks or areas that receive expressions of interest at the end of a cycle are put up for auction with the originator or the firm that originally selected the area getting a five-mark advantage.
The 55 blocks have a total area of 59,282 sq km. This compares to about 1,02,000 sq km being under exploration, they said.
Blocks would be 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 2-D and 3-D seismic survey and drilling exploration wells.
Increased exploration would 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 percent to 67 percent by 2022 and to half by 2030.
Import dependence has increased since 2015 when Modi had set the target. India imports 81 percent 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 till now has been selecting and demarcating areas it feels can be offered for bidding in an exploration licensing round.
So far, 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 been relinquished due to poor prospectivity.