Govt may relax clause that dissuaded foreign firms from taking part in OALP

Even during the first round of bidding for discovered small fields, only one foreign company, Dubai-based South Asia Consultancy FZE, showed interest
The government is likely to relax a controversial clause that kept foreign companies from taking part in the first round of the Open Acreage Licensing Programme (OALP), launched last year. Under this clause, firms had to seek the government’s permission for divesting in a firm that got the licence to an acreage (an area identified for exploring and producing oil and gas).

The last date for submitting an expression of interest (EOI) for the second round of the OALP was May 15. However, the government now wants foreign firms to come in with final bids for this round, according to a person close to the development. The Directorate General of Hydrocarbons (DGH) will make the change in the bid document.

The reluctance on the part of foreign companies stems from experiences like those of Edinburgh-based Cairn Plc, which announced the sale of its stake in Cairn India to Vedanta in December 2010 but the deal could be completed after a year in December 2011, since the government insisted on some conditions before giving approval.

There were 55 blocks on offer and 110 e-bids received during the first round.

Anil Agarwal-led Vedanta got the highest number of blocks during the round.

“This clause was one of the major reasons why foreign companies stayed away from the OALP. If India is serious about bringing in foreign investors, it should remove such clauses. The government should understand this is a high-risk business and should also ensure good returns for investors,” said R S Sharma, former chairman and managing director of state-run Oil and Natural Gas Corporation (ONGC).

Even during the first round of bidding for discovered small fields (DSFs), only one foreign company — Dubai-based South Asia Consultancy FZE — showed an interest. The government has come up with the second round of DSFs, offering 26 contract areas — including 15 onshore and 11 shallow offshore.

“During this round, 60 discovered small fields are clubbed into 26 contract areas, giving larger fields on offer compared to the first round. The round is set to be opened in June and contracts are likely to be signed by November,” the official said.

During DSF-II, an area of 3,100 square km will be on offer with an estimated 195 million metric tonnes (MMT) of hydrocarbons in place. 

The blocks awarded in the DSF-I round, which was launched in May 2016, expects a cumulative peak production of 15,000 barrels of oil per day and 2 mscmd (million standard cubic metres a day) of gas over the life of the fields awarded. The estimated revenue is a little over Rs 460 billion. After the nine rounds of the National Exploration Licensing Policy, at least 11 public sector undertakings, 58 private firms, and 48 foreign companies have a presence in India’s oil sector.

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