Oil ministry hopes to award contracts for discovered small fields by January 2017

The ministry today formally launched the auction of 67 discovered small fields and announced that contracts for all acreages with reserves worth Rs 70,000 crore are likely to be placed by January 2017. State-run firms Oil and Natural Gas Corp (ONGC) and Oil India (OIL) will continue to hold leases until the award.


“In the past, both the government and the created obstacles, and as a result reserves worth Rs 70,000 crore remained locked. Our government has brought a separate policy with switch over to revenue sharing model and launched the bid round. All contracts will be signed by January 2017,” oil minister said in a post-launch press briefing. He added the blocks would be awarded to companies with a clear time line for development that would vary between three and five years from the date of the contract.


The 67 blocks were originally discovered by and OIL but could not be developed due to their small size or technical and geological constraints. Asked whether the government will compensate the two PSUs for investments made in exploration, a senior official from the ministry clarified that ONGC and OIL will have no carried interest in the blocks. “The book value of the assets held by the two firms in around ten blocks has declined over the decades and become negligible now,” he said.


The ministry had originally identified 69 blocks including 63 held earlier by ONGC and 6 discovered by OIL. However, two of the blocks have been removed from the list of acreages to be auctioned. Of the 67 blocks on offer, 28 discoveries are in Mumbai offshore and 14 are in the Krishna Godavari basin off the Andhra coast. Also, 10 discoveries are located in the Assam shelf area. The biggest discovery on offer is D-18 in Mumbai Offshore with 14.7 million tonne oil reserves.


The Directorate General of Hydrocarbons (DGH) said the regulator will open its date room for investors simultaneously in Noida and multiple foreign locations, including London and Calgary, on June 6. Bidding will commence from July 15 and last till October 31, 2016. Based on the interest observed, the blocks will be awarded to successful bidders within two months of the last date of bid submission. Contracts will be signed within one month of the award.


“This is an excellent opportunity for companies to participate in the bidding round because it comes at a time when the cost of services for the E&P sector is low globally,” ONGC chairman DK Sarraf said. Another senior official close to the development said the government expects more interest to flow in from small but technically sound investors, though some of the big E&P companies may also participate.


The 67 blocks on offer are present in 46 contract areas with 625 million barrels of oil and oil equivalent gas of in-place reserves spread over 1,500 square kilometer in onland, shallow water and deepwater areas. Pradhan said the guiding principles behind the auction were enhancing output, attracting investment, employment generation, transparency and minimising administrative discretion.


Domestic road-shows for the bidding will be held in Mumbai on June 6, followed by similar events in Bangalore and Guwahati while international road-shows will be conducted across six geographies including Singapore, Houston, London, Dubai, Calgary and Perth.