KGBasin

It is a well known fact that India’s gas consumption is increasing in leaps and bounds by the day. Additionally, the rapidly growing nation’s potential future demand is also expected to show an upward rise. To enumerate just a few chief sources of demand for hydrocarbons in the country, let us take a brief look at some of the major sectors.

Needless to say, the power sector would be the biggest consumer of hydrocarbons. Being an agrarian economy, the fertilizer sector would also use up large quantities of gas.

In urban areas, most major residential and commercial cities are being piped for domestic gas delivery. Transport networks within such cities would consume gas too.

Undoubtedly, rapid domestic increase in gas production would completely transform India’s economy. The less expensive domestic gas would result in lower energy costs, improved trade balances and cleaner energy.

The hydrocarbon-rich Krishna-Godavari (KG) basin promises to deliver India’s energy dream.

In 1999, the Government of India launched the New Exploration Licensing Policy (NELP) to expedite the pace of hydrocarbon exploration in the country. NELP I was launched in January 1999 and was closed in August of the same year. 24 of the 25 blocks on offer were awarded. The world-famous Reliance Group gas discovery is on a block the firm acquired in this licensing round.

In the last decade, seven rounds of NELP have been concluded, significant details of which reflect in the table below.

Source : Ministry of Petroleum & Natural Gas

At least 68 oil and gas discoveries have been made by private and joint venture companies in 19 blocks. These have added more than 600 MMT of oil-equivalent hydrocarbon reserves to India’s credit.

Concluded in 2008, the seventh round of NELP resulted in 181 bids from 95 companies, including 21 foreign companies. Since NELP VII, the bid evaluation criteria (BEC) have been changed to favor companies experienced in deep-sea exploration and production. Conversely, the criteria for onshore blocks have been relaxed to make almost anyone eligible for deep-sea. Apparently, the idea is to encourage domestic companies to tie up with experienced foreign players.

As on April 1, 2009, investment commitment under NELP is about US$ 10 billion on exploration and US$ 5.2 billion on development of discoveries. The actual expenditure on exploration so far has been about US$ 4.7 billion.

In 2002, the D-6 block of the KG basin made global headlines when Reliance Industries made the world’s largest gas discovery of the year there.  Besides, India has been rewarded with a number of significant gas discoveries in recent years which could potentially transform the country’s energy landscape.

However, it was not always smooth sailing for enthusiastic Indian oil explorers. With an astounding annual average growth rate of  6-7% compared to the world average of 1.54%, India’s need for petroleum products was growing in leaps and bounds. In June 2009, the country was the 11th-largest consumer of hydrocarbons and was forecasted to be the 5th-largest in the next 2 decades. Oil consumption was expected to grow from the current 2 million bo/d to 3.2 million bo/d by 2010. Since India imported at least 70% of its hydrocarbon requirements in the mid-1990s, the Government realized the urgent need to tackle the issue of its energy needs and responded by a drastic overhaul in the petroleum sector.

Realizing that an increased level of exploration activity supported by large-scale capital investment was necessary to expand domestic exploration and production, the Government formulated the New Exploration Licensing Policy (NELP). Approved in February 1997, many of the exclusive privileges of the two national oil companies, ONGC and OIL, were withdrawn with the ambitious goal of developing a more competitive environment in the hydrocarbon sector.  As a result, instead of obtaining exploration licenses on a nomination basis, these PSUs had to lock horns with private sector companies for them. For the first time, a level playing field was established between private and public companies in the petroleum sector.