India may attract as much as $5 billion in work commitments in the country’s largest auction of oil and gas areas as explorers such as BP Plc, BG Group Plc and Santos Ltd. seek new deposits, a government official said. Explorers may bid for about 90 percent of the 70 areas offered in the eighth exploration round compared with 45 of the 57 blocks offered in the previous round, V.K. Sibal, India’s oil regulator, said in an interview today. The previous round may have attracted $3 billion, he said, based on calculations on what companies may spend to collect data and drill wells under a “work program.”
“We expect bidding to be above average because of the meltdown,” Sibal said. “Next year we may offer 70 to 80 blocks under a new round.”
Oil companies such as Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc aren’t participating in Indian auctions because they want producing areas, he said. Asia’s third-largest energy consumer, seeking to cut oil imports, may have received about $12 billion in work commitments and additional spending under the country’s first five rounds, Sibal said.
Worldwide spending on oil and gas exploration may drop 12 percent to $400 billion this year, according to Barclays Capital Research.
The government reinstated a seven-year income-tax holiday for gas projects to attract more explorers, changed a three- phase work program to a single one offering companies more flexibility, and has specified the penalties for incomplete drilling commitments in the new exploration round, Sibal said.
Reliance Industries
The legal wrangle between Reliance Industries Ltd. and billionaire Anil Ambani’s Reliance Natural Resources Ltd. over gas pricing may “impact” investments in the country’s latest bidding round, Sibal said.
“No fight adds value,” he said. The government set a price of $4.20 per million British thermal units in 2007 for gas from Reliance’s KG-D6 field, excluding taxes and transportation costs.
The government hasn’t deviated from the terms of the production sharing contract signed with Reliance Industries, Sibal said.
India awarded 44 areas last year to companies including BHP Billiton Ltd., the world’s largest mining company, and Oil & Natural Gas Corp., India’s biggest exploration company. A bid for one field by Cairn Energy Plc was rejected.
Companies may have committed to spend $10 billion on energy exploration in India, the finance ministry said in a report in July. Companies have spent $4.7 billion on exploration as of April 1 after India started auctioning oil and gas areas to companies in 1999, it said. An additional $5.2 billion has been spent on developing 68 discoveries in 19 blocks.
India may “soon” shift to an open acreage policy for awarding oil and gas areas after it completes building a data bank of oil and gas areas, Sibal said. Explorers can access the seismic data and make bids for the blocks that interest them, he said.
Source: www.bloomberg.com