Auction of oil, gas fields with Rs 70K cr reserves from July

India liberalised its exploration and production regime almost two decades ago when in early 1990s it auctioned about 28 fields to private and public investors.

India on Wednesday announced auction of 46 small discovered oil and gas fields, holding about Rs 70,000 crore (Rs 700 billion) worth of hydrocarbon reserves, that were "given-up" by state-owned ONGC and Oil India.

The auction, to be conducted on simpler contractual terms together with pricing and marketing freedom, will be the first licensing round in over four years.

Domestic and international roadshows for the auction will begin on June 6 and e-bidding will start on July 15 and close on October 31. Bids will be finalised by mid-November and contracts signed by January, Oil Minister Dharmendra Pradhan said.

India liberalised its exploration and production regime almost two decades ago when in early 1990s it auctioned about 28 fields to private and public investors.

In late 1990s, it further liberalised its E&P sector with the introduction of New Exploration Licensing Regime (NELP) regime that allowed 100 per cent FDI and offered a level playing field to private and national oil companies, he said.

NELP was based on Production Sharing Contract (PSC) that meant sharing of revenues with government post recovery of cost by contractor.

"Unfortunately, the PSC regime has witnessed several litigations and arbitrations, most of them related to issues emanating from key PSC provisions such as cost recovery, work programme, operational, administrative and regulatory inflexibility.

"Apart from adversely affecting India's domestic oil and gas output, such disputes have also hurt India's image as a serious E&P destination," Pradhan said announcing the bid round.

Fields will be given to those who offer the maximum share of oil and gas to the government, he said.

Stating that India is yet to unlock all of its hydrocarbon potential, he said the auction will help boost domestic production and cut import reliance.

The fields offered for international bidding hold 625 million barrels of in-place oil and gas reserves.

Pradhan said the 46 fields that are offered are actually 67 small and marginal discoveries that have been clubbed.

Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) "surrendered" these as they could not develop them because of huge overhead cost and uneconomic size, he said.

He said ONGC and OIL can bid for the fields on offer. Asked if the two state-owned firm could not have developed them if the new terms of pricing and marketing freedom were given to them as being offered to private firms, Pradhan said, "No I don’t think so."

He however did not say as to why ONGC and OIL would bid again for these fields. Last exploration licensing round concluded in March 2012.

That was the Ninth round of bidding under NELP. A total of 256 block were awarded in the nine rounds of NELP.