As part of efforts to reduce its dependence on crude oil imports, India, Nigeria’s biggest Oil buyer, has revived its search for Oil and Gas at home by offering 55 blocks in its first major licensing auction in eight years.
India, which in 2013 replaced the United States as Nigeria’s biggest market, saw its import of Nigerian crude rise to a peak of 20.37 million barrels in April 2015.
But the country has stepped up efforts to propel investment in its energy sector and achieve the plan to double its existing oil production from current 80 million metric tonnes to about 150 to 155 million metric tonnes by 2022.
India has set a target of cutting dependence on oil imports by 10 per cent by 2022.
“OLAP [Open Acreage Licensing Policy] is just one of the pillars via which the Government’s import reduction target could be met. The terms are quite liberal and the pricing freedom is a big step,” said Alay Patel, principal upstream analyst for Asia-Pacific at Wood Mackenzie, according to Platts.
Based on data analysis, the OLAP programme allows the companies to carve out their own blocks after which they can send their Expressions of Interest.
Under the programme, India last week offered 55 blocks spread across a total area of around 60,000 square kilometres for exploration, as the Directorate General of Hydrocarbons received 57 Expressions of Interest in November. Bids for the auction close on April 3, while the blocks will be awarded in June.
The blocks offered in the latest round have been identified by exploration companies, mostly state-owned.
The latest round will be the first major auction under the new Hydrocarbon Exploration and Licensing Policy (HELP) approved by Prime Minister Narendra Modi’s Government in March 2016.
HELP also includes the discovered small fields programme. HELP brought in an open acreage licensing policy that allowed prospective companies to offer Expressions of Interest in any area that is currently not under a production or exploration licence.
Before this round, the last auction for Oil and Gas blocks took place in 2010 under the New Exploration Licensing Policy.
The auctions are part of an overhauled exploration licensing policy that allows pricing and marketing freedom for operators and is a move to a revenue-sharing model, under which the Government gets a share of the revenue from the moment production begins.
“It offers more liberal terms than in the past. For the first time, distribution of blocks will not be forced on exploration companies, which could boost interest in the auction,” said, The Director at Resource Economist, Ehsan Ul-Haq.
For a country dependent on imports for 80 per cent of its crude Oil needs, India’s Oil import bill has been subject to wild swings. The current recovery in crude Oil prices is adding to the headache for India’s policymakers.
Leading companies – ONGC, Cairn India, Reliance and BP – have carved out ambitious investment plans for the next few years in an effort to boost oil and gas output in the country.
State-owned ONGC aims to spend about $4bn annually over the next few years to speed up upstream projects, in line with the Government’s goal of moving to a gas-based economy and cutting dependence on crude imports.
While many countries sitting on Oil reserves are keen to produce the commodity before it becomes less valuable as global policies to address climate change come into effect, Nigeria is dragging its heels on the reform of the Oil and Gas industry.
The reform efforts, which date back to April 2000 when the Government of President Olusegun Obasanjo set up the Oil and Gas Reform Implementation Committee, have suffered serious setbacks.
While Nigeria has failed to hold any licensing rounds since 2007, many of its peers have continued to push ahead with plans to attract investment to their Oil and Gas industries through licensing rounds.
A key obstacle to the growth of the Nigerian Oil and Gas industry has been widely described as the regulatory uncertainty caused by the delay in the passage of the Petroleum Industry Bill.
The bill, which seeks to change the organisational structure and fiscal terms governing the industry, suffered setbacks in the 6th and 7th National Assembly.
Currently before the 8th National Assembly, it was split into four parts — Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — to fast-track its passage into law.
The Senate and the House of Representatives have passed the PIGB.