Oil and gas exploration on 31 blocks auctioned in 2016 to begin
The Dollar Business Bureau
The rights to 31 oil and gas exploration blocks comprising 44 small fields, which were auctioned under the Discovered Small Field (DSF) Bid Round 2016, have finally been approved by the government on February 15, 2017.
The development of these new sites is expected to yield an additional 15,000 barrels of oil per day, contributing significantly to PM Modi's goal of reducing dependence on oil imports by 10% by 2022. Owing to this expansion, gas output is expected to increase by 2 million cubic meters per day.
The revenue over the next 15 years from these sites has been pegged at Rs.46,000 crore, of which 9,600 crore will proceed to the government.
The new fields have been awarded to a mix of new players like Sun Petrochemicals, Megha Engineering and Infrastructure, and established oil giants like Hindustan Exploration Co. and Oil India Ltd. Of the 22 companies which have collectively bought rights at the auction, 15 are new entrants in the oil excavation business.
These small areas, with estimated combined reserves of 625 million barrels, were discovered by Oil and Natural Gas Corporation (ONGC) and Oil India Ltd. Most big companies in the sector like Reliance Industries Ltd steered clear of the auction, as they are focused on larger fields. Production is expected to commence soon, given the small size of fields and confirmed oil and gas reserves. However, the new entrants may face constraints due to the capital-intensive nature of the industry and the geologically daunting terrains of the fields in question.
For a country that imports more than 80% of its crude oil, it's past time India devices strategies to become more self-reliant and less import dependent. Moreover, the likely correction of crude oil prices which slipped to unprecedented lows in 2016 is a looming threat to India's widening trade deficit. Securing a long term high growth that will inevitably be accompanied by increasing oil consumption requires India to augment its production capacity.