ONGC, OIL, Reliance Industries, BP skip 46 small oil & gas fields’ auction

State-owned ONGC and Oil India as also Reliance Industries and BP plc on Monday skipped the auction of 46 discovered small oil and gas fields, with only 34 areas attracting bids. The state-owned firms had initially indicated that they will bid for the fields, which were said to have been "surrendered" by them as they were commercially unviable under the price control regime. But new liberal fiscal terms had made these viable and the PSUs wanted to get them back.

The two however had not offered any bids by the time the round closed for the day and the reason offered was that since they had originally surrendered them, it did not make any sense to bid for these fields. Sources said as many as 42 bids were received for 34 out of the 46 fields on offer, with Cairn India and Hindustan Oil Exploration Co (HOEC) being the major bidders alongside five smaller foreign firms.

BP plc, the biggest foreign investor in the oil and gas sector in India, as also Reliance Industries did not bid in the round that was also skipped by global energy giants like Exxon Mobil and Chevron. Magna Energy too, the firm floated by maverick oil explorer Mike Watts who gave India its largest oilfield in Rajasthan, did not bid even though it was betting big on the country.

While Oil Minister Dharmendra Pradhan travelled the globe - from Singapore to Houston - to get investors for the first oil field auction round in over four years, big giants sat out primarily due to small size of acreage being offered and the overheads required to bring them to production.

Launching the auction round in May, Pradhan had stated that Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) would be able to bid for the fields on offer. But the two firms were reportedly asked not to bid as private and foreign investors thought they would not be able to compete with the might of state-owned firms with inside knowledge of the fields.

As many as 67 idle discoveries, primarily of ONGC, were clubbed to form 46 fields for offer in the so-called Small Discovered Field round, bids for which closed today. Of these, 26 are on-land, 18 shallow water and 2 deepwater fields.

The fields hold an in-place reserves of 48 million tonnes of oil and over 38 billion cubic metres of gas reserves, worth Rs 70,000 crore at current prices. Sources said the government took away these discoveries from ONGC as it could not develop them because of small size and unviable price.

But in the bidding round, the government is offering complete pricing freedom and liberal fiscal terms. The fields offered included 28 discoveries in Mumbai offshore, 14 are in the prolific Krishna Godavari basin and 10 discoveries in the Assam shelf. . The auction was done on a new revenue sharing model where bidders have been asked to quote the revenue they will share with the government at low and high end of price and production band. The last exploration licensing round concluded in March 2012. That was the 9th round of bidding under New Exploration Licensing Policy (NELP). A total of 256 blocks were awarded in the nine rounds of NELP.

The discoveries were given up by the state run firms as late as 2012-13. In-place reserves in these identified discoveries/fields is about 88 million tons of oil and oil equivalent of gas. Sources said the auction was done on a new revenue sharing model where bidders will be asked to quote the revenue they will share with the government at low and high end of price and production band.

The new revenue sharing regime replaced the controversial Production Sharing Contract (PSC) model where oil and gas blocks are awarded to those firms which show they will do maximum work on a block. The PSC regime allowed all their investments to be recovered from sale of oil and gas before profits are shared with the government. This model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government.

Also, single licence for exploration and exploitation of conventional and non-conventional hydrocarbons will be issued and operators will have freedom to sell oil and gas on arms on arms length market price, they said, adding that there would be no cess on crude oil.

There has been a declining trend in coal stock position at power plants in the ongoing fiscal, mainly due to rise in coal-based generation. "...the coal stock position at power plants has shown a declining trend during 2016-17 and has reached 18.66 MT (million tonnes) on November 14, 2016 against the normative requirement of 30.29 MT," Minister of State for Coal, Power, New and Renewable Energy and Mines, Piyush Goyal said in a reply to Rajya Sabha.

The drop in coal stock is mainly due to increase in coal-based generation by 6.8 per cent during April-September 2016 period, as compared to the same period last year. Further, some of the power plants are regulating off-take of coal in view of the high coal stock with them and as per the generation schedule given to these plants.

Due to enhanced availability of domestic coal, the coal stock position at power plants as on March 31, 2016 reached 38.87 MT, as against the normative requirement of 29.74 MT. "In 2015-16, pithead coal stock at mines of CIL increased from 53.47 MT as on April 1, 2105 to 57.64 MT as on March 31, 2016," the Minister said.

In the current year, coal stock at mines of CIL had declined to 39.8 MT (provisional) as on November 14, 2016.