India Gets Aggressive About Oil Exploration

While exploration has slowed in many parts of the world in response to the industry's lagging downturn, India is moving full steam ahead to encourage exploration and production on a domestic and international scale.

After a decline in production over the last decade, the country – which is fiercely battling growing energy demands – is making bold moves to open its underexplored oil and gas fields and to enact policies that make exploiting them more enticing.

"Since most of our country's old and mature fields are on the decline, there is obviously an urgent need to have a quantum jump in the exploration efforts," said B.N. Talukdar, the director general of India's Directorate General of Hydrocarbons (DGH), in a recent public statement.

Appointed to his post in 2013 to assist with India's petroleum reforms, Talukdar said, "The country immediately needs to enhance the hydrocarbon resource kitty and its production from both existing and to-be-discovered hydrocarbon resources. This calls for huge supplemental efforts by private and multinational companies who could be attracted for making investments in this sector of the country."

Dharmendra Pradhan became India's minister of state for Petroleum and Natural Gas in 2014 on a platform of pushing the country's petroleum industry forward. Pradhan has spoken publicly of multiple policy reforms that have or will be enacted, including:

Gathering more geoscientific data on underexplored areas.

Allowing access to the country's unconventional resources.

Deregulating diesel fuel and implementing new natural gas pricing.

Introducing fiscal policies and incentives to reduce the notorious red tape in contracting processes.

"The people of the country have large expectations from the new government, and this government is dedicated to the welfare of the poor," Pradhan said on India's "Elections" website. "The Indian economy has an important role in the world economy, and I would endeavor to make contribution to this effect."

Exploring India

For years, India has relied on the production of major discoveries in the Krishna-Godavari, Barmer and Assam basins, leaving many of its 26 sedimentary basins virtually unexplored, said Vinay Sahay, AAPG Geoscience Student Chapter coordinator of the Asia Pacific Region (which includes India, Pakistan and Bangladesh) and chief editor of the International Basic and Applied Research Journal.

(Of India's 3.14 million square kilometers of sedimentary basins, 1.3 million square kilometers are located in deep waters and 1.84 square kilometers are on land or in shallow waters.)

"Indian companies have focused much on enhanced recovery from already producing oilfields in addition to nearby, relatively small discoveries," Sahay said. "There has been less focus on Greenfield regions, thus large oilfield discoveries and large reserve additions are comparatively less."

India's last hydrocarbons assessment of 15 of its 26 sedimentary basins took place 16 years ago.

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While exploration has slowed in many parts of the world in response to the industry's lagging downturn, India is moving full steam ahead to encourage exploration and production on a domestic and international scale.

After a decline in production over the last decade, the country – which is fiercely battling growing energy demands – is making bold moves to open its underexplored oil and gas fields and to enact policies that make exploiting them more enticing.

"Since most of our country's old and mature fields are on the decline, there is obviously an urgent need to have a quantum jump in the exploration efforts," said B.N. Talukdar, the director general of India's Directorate General of Hydrocarbons (DGH), in a recent public statement.

Appointed to his post in 2013 to assist with India's petroleum reforms, Talukdar said, "The country immediately needs to enhance the hydrocarbon resource kitty and its production from both existing and to-be-discovered hydrocarbon resources. This calls for huge supplemental efforts by private and multinational companies who could be attracted for making investments in this sector of the country."

Dharmendra Pradhan became India's minister of state for Petroleum and Natural Gas in 2014 on a platform of pushing the country's petroleum industry forward. Pradhan has spoken publicly of multiple policy reforms that have or will be enacted, including:

Gathering more geoscientific data on underexplored areas.

Allowing access to the country's unconventional resources.

Deregulating diesel fuel and implementing new natural gas pricing.

Introducing fiscal policies and incentives to reduce the notorious red tape in contracting processes.

"The people of the country have large expectations from the new government, and this government is dedicated to the welfare of the poor," Pradhan said on India's "Elections" website. "The Indian economy has an important role in the world economy, and I would endeavor to make contribution to this effect."

Exploring India

For years, India has relied on the production of major discoveries in the Krishna-Godavari, Barmer and Assam basins, leaving many of its 26 sedimentary basins virtually unexplored, said Vinay Sahay, AAPG Geoscience Student Chapter coordinator of the Asia Pacific Region (which includes India, Pakistan and Bangladesh) and chief editor of the International Basic and Applied Research Journal.

(Of India's 3.14 million square kilometers of sedimentary basins, 1.3 million square kilometers are located in deep waters and 1.84 square kilometers are on land or in shallow waters.)

"Indian companies have focused much on enhanced recovery from already producing oilfields in addition to nearby, relatively small discoveries," Sahay said. "There has been less focus on Greenfield regions, thus large oilfield discoveries and large reserve additions are comparatively less."

India's last hydrocarbons assessment of 15 of its 26 sedimentary basins took place 16 years ago.

Based on that assessment, the DGH estimates that 28 billion tons of conventional oil and oil equivalent are located in 15 of India's sedimentary basins and offshore areas. However, until last year, only in-place hydrocarbon volumes of roughly 11 billion tons could be established through exploration by India's national oil companies and private/joint venture companies, leaving an estimated 17 billion tons, or 61 percent of resources, in the "yet to find" category, according to the DGH.

Because of the dearth in data, the U.S. Geological Survey (USGS), which assessed four provinces in India in 2012 for their hydrocarbon potential, could only estimate the amount of undiscovered, technically recoverable oil and gas based on broad ranges, explained AAPG member Tim Klett, a research geologist with the USGS who performed the assessment.

For example, in the Mannar Basin, an offshore basin between India and Sri Lanka, estimates for crude oil ranged from 234 to 837 million barrels, resulting in a mean of 483 million barrels.

All in all, however, in the Assam, Bombay, Cauvery and Krishna-Godavari provinces, the USGS estimates a total mean value of 3.5 billion barrels of crude oil, 79 trillion cubic feet of natural gas, and 1.7 billion barrels of natural gas liquids, Klett said.

The resources are there.

Getting them out of the ground has been an issue for decades, despite the fact that India is the fourth largest consumer of energy after China, the United States and Russia.

"India is one of the fastest growing economies in the world," reports the DGH. "Strong GDP growth rates gave resulted in a surging demand for energy including oil and gas."

Regardless of when India hit its energy threshold, its leaders have decided the time has come for the oil and gas to begin flowing again.

More Data Required

"Exploration is essential for enhancing domestic production in India," Pradhan said. "Geoscientific data on nearly 48 percent of the more than three million square kilometers of Indian sedimentary basins is either scarce or unavailable."

The government plans to gather data on roughly 1.4 million square kilometers through 2-D seismic surveys over the next five years and drill a limited number of parametric wells.

It also plans to reassess its known resources and include information on all 26 basins.

In order to acquire geophysical data in underexplored areas, the government has developed a new policy for geoscientific data generation to carry out nonexclusive, multi-client, geoscientific surveys and activities, according to the DGH.

The DGH also reports that a National Data Repository is currently in development to house all available exploration and production data. It will allow all operators to view India's data from anywhere in the world.

Joining the Shale Movement

In its 2011 assessment of the Assam, Bombay, Cauvery and Krishna-Godavari provinces, the USGS estimated that those areas contain a technically recoverable mean volume of 6.1 trillion cubic feet of potential shale gas.

The Oil & Gas Year (TOGY) estimates shale gas reserves to be between 300 and 1,200 trillion cubic feet.

Yet, in the past, operators exploring for conventional hydrocarbons could not apply for shale oil or gas rights in their exploration licenses. The country only allowed a license for a single item, such as oil or gas. A new policy implemented in 2013 changed that.

"We are evolving a Uniform Licensing Policy which will allow operators to explore for and produce all types of hydrocarbon resources including shale gas and oil in an awarded area," Pradhan said. "There is an urgent need to … explore and develop other unconventional hydrocarbon energy resources like shale gas and oil, coal bed methane and gas hydrates."

The DGH estimates that India's coal bed methane resources are at 92 trillion cubic feet. In fact, India has the fifth largest proven coal reserves in the world.

To encourage exploration in all of India's 26 sedimentary basins, the government is currently working to invite bids for a new round of exploration and building infrastructure to allow hydrocarbons to be taken to market.

"Improving infrastructure will decrease transportation costs and the cost of petroleum and its products," Sahay said. "This will enhance companies' profit margins."

In addition, the country will provide more data on gas hydrates to encourage exploration.

Focusing on Gas

A gas supply deficit has longed plagued India.

Globally speaking, gas comprises roughly 24 percent of the energy market, whereas in India, that number is a mere 8 percent.

According to a 2014 report from the IHS, an "unmet gas demand now represents a considerable drag on India's economy and the cost of maintaining subsidized, low gas prices has become unsustainable," stated Rajiv Biswas, chief economist of Asia Pacific at IHS.

The report also stated, "the long-term distortion of India's gas pricing regime has brought about a major gas supply shortfall, acting as a brake on economic activity."

Longing for greater energy independence, India in 2014 deregulated diesel fuel and announced a revised formula for raising the price of domestic gas.

"These issues of fuel subsidies and remunerative pricing for domestic gas have been on the table for a long time, and both of these steps will add new potential to the Indian oil and gas industry," said Reetu Ragini, AAPG Young Professional lead and secretary for the Asia Pacific Region.

Deregulating the price of diesel combined with natural gas pricing mechanisms have created an equal playing field for the international players to compete with the national exploration and production companies, Sahay said.

After diesel regulation, now private companies such as Reliance Industries Ltd. have begun selling diesel and petrol from their own service stations, he added.

"Essentially, the country has liberated natural gas pricing, giving operators more incentive for exploration," Sahay said. "Companies are now free to fix the price of natural gas and sell it in the market. The market will decide the pricing."

"The current set of policy reforms increases the price of domestically produced gas, thereby stimulating additional domestic exploration and production activity," Biswas stated in the IHS report, which added that India's gas pricing reforms represent an important policy shift and should stimulate domestic production, soften growth in reliance on expensive LNG and accelerate India's economy.

New gas pricing is expected to increase the exploration and production of natural gas, with special emphasis placed on deepwater discoveries.

Oil and Natural Gas Corporation, a multinational oil and gas company in India, plans to raise its output by more than 80 percent by 2019. The country also will import greater volumes of liquefied natural gas (LNG) by building more infrastructure, including new LNG terminals and expanding its gas grid by 15,000 kilometers of pipelines.

"Crude oil and natural gas is a vital source of primary energy in India," said Secretary Saurabh Chandra in a recent public statement. "It is more efficient, convenient, and a cleaner source as compared to other fossil fuels like coal."

Revamping Policies

Despite the fact that India has allowed 100 percent foreign direct investment, it has not typically been appealing for exploration because of policy blockades, hazy regulations regarding production-sharing contracts and the pricing of commodities and subsidy mechanisms, Ragini said.

Furthermore, some say that even after blocks were allocated to operators, obtaining statutory clearances from the Ministry of Defense, Ministry of Home Affairs and Ministry of Environment, Forests and Climate Change remained a herculean task.

However, through major policy overhauls, the government is creating an operational framework it says will "incentivize investors." New fiscal policies and incentives, combined with a regime that is ultra transparent and stable, are believed to be the foundation for a healthier business environment.

One change includes a recent move to a revenue-sharing model from a cost-recovery model. This new production-sharing contract framework allows international companies to recover their costs before they pay the government its share of revenue.

The government will also modify the contractual regime to facilitate investors to avoid micro-level management and reduce regulatory requirements, Pradhan said.

Investors will find the decision-making process to be "fast and effective" following the removal of "roadblocks," Chandra said.

In addition, the government plans to adopt the Open Acreage Licensing Policy, which will allow upstream companies to bid for any oil and gas block without waiting for the bidding announcement, as is the current policy.

According to the DGH, "The Cabinet Committee of Economic Affairs has approved the proposal regarding relaxations, extensions and clarifications at the Development and Production stage … for early monetization of hydrocarbon discoveries. These reform initiatives will help the monetization of some of the pending operational issues which are hampering E&P operations and create better business climates for investment."

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