E&P sector in India - Historical perspective

Exploration activity started in India way back in 1866 in the North Eastern state of Assam with the drilling of Digboi well, just seven years after drilling of the first oil well in Pennsylvania, USA. For about a century the E&P activity was restricted to the North Eastern part of the country and till early 1960s the total crude production in India was only about 10,000 bpd. Burmah Oil was the only company engaged in E&P. With the demand growing, the government recognized the need to explore hydrocarbon resources and accordingly set up Oil & Natural Gas Commission (ONGC) in 1956. Burmah Oil was also merged with Oil India Ltd. (OIL), this was however taken over by GOI in 1981. ONGC was converted into a public limited company in 1993. ONGC and OIL enjoy the status of National Oil Companies (NOCs) and have a duopoly with about 90% and 10% share respectively. The NOCs market their produce directly except natural gas, which is distributed through Gas Authority of India Ltd. (GAIL). Thus, the upstream petroleum industry in India is over a century old, the Digboi field of Assam Oil Co. having been put on production as early as in the year 1890. However, oil production in India exceeded the figure of One million tonnes per year only in the year 1961, when ONGC put the Ankleshwar field on production.

The production of crude oil increased to over 35 million tonnes per year in year 1997-98. This represents only less than 50% of country's requirement of petroleum. The balance has to be made good by imports putting our foreign exchange exchequer to a great strain. Considering the ever-growing demand of petroleum at the rate of about 7% per annum, and the dwindling reliance on indigenous production of oil and natural gas, the Government of India, in 1991, decided to open up the exploration and production of oil and natural gas to the private sector.

In its first version – NELP I, the state governments were consulted for terms and conditions that now have become part of NELP. Concurrence of respective state governments was sought before any block was offered for E&P activities. In the sixth round of NELP, held on February 23, 2006, 165 bids were received for 52 of the 55 exploration blocks covering, 3.52 lakh square km, on offer. This was the highest number of bids that NELP got ever since the NELP I, held in January 1999. In NELP V 69 bids were received.In NELP VI, the government had taken special, intensive promotional efforts and had also created a special website for online data accessibility and also bid documents complete with terms and conditions for NELP VI. Promotional road shows in Delhi, Houston, Dubai, Kuala Lumpur,Perth and London were held. The efforts seem to have been rewarded as NELP VI has proved to be the most successful round with a total of 66 companies – 35 foreign companies and 31 Indian companies – bidding, either on their own or as consortia. Of the foreign companies that took part in the bidding process, 20 are new entrants. The renewed interest of multinationals, namely, BG, BP, Petronas, ENI and the entry of the French multinational, TOTAL, augurs well for the oil and gas exploration activity in India. NELP-VI could well take India to a select band of nations to have extensive deep sea exploration programmes undertaken by some of the leading deep sea exploration companies of the world.

The Ministry of Petroleum invited bids from private parties / consortiums, in a number of bidding rounds. Consequently, as many as 30 small oil-gas fields and around 50 exploration blocks were awarded to private parties, for exploration and production work. It was also decided by government to import Liquefied Natural Gas, to meet the ever-growing requirement of natural gas in the country. The government also decided to open up oil exploration in the deeper continental shelf by private parties.

Production of oil and gas by the private parties / consortium has continued since 1994, although success has been limited due to various factors. Considering the above factor and the growing demand of hydrocarbons in India, the government announced the New Exploration Licensing Policy (NELP) during 1997, which has envisaged a number of incentives for the prospective bidders, in order to attract more foreign participation and accelerate the growth of petroleum production in India.