Kolkata: The Centre is drawing up a plan to step up exploration of oil and gas in India. The pressing need is an outcome of the critical dependence of India on imports
of both crude oil and natural gas for its fast-growing energy needs. The incentive package that the Narendra Modi government is preparing is worth Rs 80,000 crore. Under this scheme, the government can bear up to 50% of the drilling cost of deep water exploratory wells. The government wants to attract foreign investment and reduce exploration risks. The Ministry of Petroleum and Natural Gas is finalizing this proposal under the National Deepwater Exploration Mission, named Samudra Manthan, said a repot by The Economic Times.
Financial assistance
The government is sweetening the scheme with incentives. It could cover up to 50% of the cost of drilling deep water exploratory wells. However, the maximum financial assistance for each well will be capped to prevent escalation of projects costs beyond a limit. The government is reportedly considering covering a portion of the cost of 3D seismic surveys. This proposal is currently under discussion with various ministries. After final approval, it will be presented to the Union Cabinet.
Significance of the plan
India is the fastest growing major economy in the world and, therefore, needs a lot of energy. The country traditionally meets a large portion of its energy needs through imports of both natural gas and crude oil. As the West Asia crisis made it evident, fluctuation of crude oil and gas prices can throw the economy in a tizzy with rise in inflation and fast declining cost of the rupee against the US dollar. Consequently, the need to discover new oil and gas reserves domestically is growing. The point is deep water and ultra-deep water exploration is too expensive and risky.
Drilling a single deep water well can cost between Rs 1,000 crore and Rs 1,200 crore. Ultra-deep water wells can cost several hundred crores of rupees more. These high costs and uncertainty about commercial success is an entry barrier to companies in this sector.
Attracting foreign investors
The government thinks it can cut financial risk in the early stages of exploration and it could attract global companies to invest in such exploratory work in India. These incentives will be available to both public and private companies.
ONGC recently commissioned its first deep water exploratory well under the Samudra Manthan program. This is considered a significant step in India’s offshore exploration strategy.
18 new blocks under the hammer
The government is also auctioning 18 deep water and ultra-deep water blocks under the Open Acreage Licensing Policy. September 17 is the deadline for submitting bids for these blocks. Besides the incentive scheme, the government is also working to improve the quality of geological data and has made significant investments to obtain 2D seismic data from offshore areas. It is also trying to involve private companies to crunch and process old data using modern technology.
