India in oil and gas development transformation

Jan 14, 2019
7 min read
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India is currently undergoing a transformation within its oil and gas industry, with new policies and auctioning off of exploration blocks set to boost domestic production to meet a burgeoning demand from its fast- growing economy.

The country’s energy consumption growth is expected to increase 165 per cent from 2016 to 2040 according to BP’s Energy Outlook 2018. Along with rising demand, the country aims to cut oil imports by 10 per cent by 2022, making domestic production a priority.

This is being facilitated by an improved regulatory environment and several initiatives launched to attract domestic companies as well as foreign investments.

A key policy reform is that new Exploration & Production licenses will fall under the new Hydrocarbon Exploration and Licensing Policy (HELP), which has a revenue sharing model with low graded royalty rates and single licence for all type of hydrocarbons among other facilities which lower the regulatory risk or burden.

Other steps taken by the government include freeing up on gas-pricing to be dictated by market dynamics, which has encouraged many producers to take part in new licensing rounds.

Earlier this year, India’s Minister of Petroleum and Natural Gas launched the second round of auction for exploration and production of 60 discovered small fields covering about 3,100 square metres of area.

The second round of bidding offers 26 contract areas – 15 onshore and 11 offshore in shallow waters. It contain a total of 59 oil and gas fields in this second round under the Discovered Small Fields (DSF) policy, following a first competitive round in 2016. The government has set the deadline for filing of the bids for December 18, 2018.

 The signing of contracts with the successful bidders for the 59 discovered small oil and gas fields in the 26 contract areas is likely to take place in January next year, the Indian Ministry of Petroleum said.

The fields are spread over eight sedimentary basins which have an estimate of combined hydrocarbons in place of over 195 million metric tonnes or 1.4 billion barrels, according to the Directorate General of Hydrocarbons (DGH).

The national data depository has 1.76 million linear kilometres of 2D seismic data, 0.65 million square kilometres of 3D seismic data and more than 13,981 well logs.

Areas of oilfields on offer include Rajasthan, Gujrat, Kutch & Cambat, Mumbai offshore, Andhra Pradesh, KG offshore, Mahanadi offshore and Assam & Tripura.

Shashi Shanker, Chairman & Managing Director, Oil & Natural Gas Corporation (ONGC), speaking during a conference session at ADIPEC 2018, said that the from the total acreage available for exploration and production, more than 50 per cent is unexplored, mainly because of scanty data.

“The government has taken the initiative to acquire seismic data for more than 48,000 line km of 2D data, which is currently in process of being acquired,” he said.

Another initiative the government is taking, is re-assessing the recourse potential, which has gone up from 28 to 42 billion tons. “This is a major property prospect, in addition to the past data depository, which is easily and cheaply accessible. I’m pretty sure, the kind of initiatives the government has taken and policy reforms, the investment in Indian ENC should increase,” he added.

In the second round of bids, aside from a single license issued for all types of oil and gas resources that operators want to pursue in the areas they will have won, other incentives include no signature bonuses, full pricing and marketing freedom, and reduced royalty rates for shallow water reserves compared to the first DSF-I bid round.



Meanwhile, a major part of oil production- about 70 per cent, is coming from fields more than 30 years old, Shanker said, adding that in order to improve the recovery factor, Indian government has come up with EOR policy that reduces taxes to boost production activity through enhance oil recovery methods.

  1. K. Sharma, director (Operations), Oil India Ltd (OIL) said the government has given a lot of emphasis on energy

development and has announced plans to reduce imports by 10 per cent in coming years, so it is taking many steps to boost domestic production on the backdrop of policy reforms.

He said the company recently acquired acreage which it will explore aggressively.

“For Oil India and ONGC, our fields are now mature, but still able to maintain production at the same levels and indirectly, we are able to increase production with the help of fit-for-purpose technology, worker operations and increasing infrastructure,” he said.

The country’s fuel consumption is dominated by diesel, according to Sanjiv Singh, chairman, Indian Oil Corporation Ltd. (IOCL). The company is making investments to modify fuels that will enable fewer carbon emissions, allowing Euro 4 compliant vehicles to also meet new and stricter Euro 6 emissions targets.

“No other country moved from Euro 4-6 in a span of three years. We are also installing many projects to reduce fuel consumption so that the internal cost of crude goes down,” Singh added.



India aims to raise its domestic oil and gas production and possibly cut its massive crude oil import bill as its oil demand is expected to continue to grow in the foreseeable future. Currently, Indian imports around 80 per cent of the crude oil it consumes.

The country’s Indian Strategic Petroleum Reserves (ISPRL) in November signed an agreement with Abu Dhabi National Oil Company (ADNOC) to explore the possibility of storing its crude at the firm’s underground oil storage facilities in India.

ISPRL, an Indian government-owned company mandated to store crude for emergency, has 2.5 million-tonnes, or about 17 million barrels of oil capacity divided into four equal compartments at its Padur facility in south-western state of Karnataka. Under the agreement, ADNOC said it could store crude in two compartments at Padur.

“India is an important oil market, and this agreement underscores the strategic energy partnership between the UAE and India, which leverages the UAE’s and Adnoc’s expertise and oil resources,” said Dr Sultan Al Jaber, UAE Minister of State and Adnoc Group chief executive.

“It is our firm hope that we will be able to convert this framework agreement into a new mutually beneficial partnership that will create opportunities for ADNOC to increase deliveries of high-quality crude oil to India’s expanding energy market.”

The agreement follows the arrival on November 4 of the final shipment of the initial delivery of ADNOC crude to be stored in another ISPRL underground facility in Mangalore, also in Karnataka, which will store 5.86 million barrels of Abu Dhabi’s oil.

ISPRL has already built 5.33 million tonnes of underground storage capacity at three locations that can meet around 10 days of the country’s oil needs. The government of India, in June, announced the creation of two new reserves, a 4 million-tonnes storage facility at Chandikhol, in the eastern state of Odisha, and an additional 2.5 million tonnes facility at Padur.

India, the third-biggest Asian economy, and the UAE, which accounts for 4.2 per cent of the global crude production, have forged closer energy ties recently.  ADNOC is the only foreign oil and gas company to invest, by way of crude oil in India’s strategic petroleum reserves programme.

Around 8 per cent of India’s energy imports are supplied by the UAE.

India’s energy demand is forecast, by the International Energy Agency, to grow by more than any other country in the period to 2040, propelled by an economy that will grow to more than five times its current size. Indian energy consumption is expected to more than double by 2040, accounting for 25 per cent of the rise in global energy demand, and the largest absolute growth in oil consumption.



Highlighting India’s strategy to reduce import-dependency, ONGC in October awarded its largest single subsea contract to a consortium of McDermott, Baker Hughes, a GE company and Larsen & Toubro.

This contract, for its deepwater project, the development of block DWN-98/2 in the Krishna Godavari basin, includes the supply of all subsea production systems, including 34 deepwater trees, and the installation of subsea umbilicals, risers and flowlines at a water depth of between 300 meters and 3,200 meters.

The subsea award represents the largest single subsea contract awarded by ONGC. Delivery is scheduled for 2020 for the gas system and 2021 for the oil system.