Open acres:

Open acres:

Context

•  Recently the government liberalized the regime for oil and gas exploration by announcing Open Acreage Licensing process that allows companies to carve their own areas for hydrocarbon hunting.
•   Also was launched India’s maiden National Data Repository (NDR) that will assimilate, preserve and upkeep country’s vast sedimentary data for future use in oil and gas exploration and production. It will also aid in Open Acreage Licensing.

Background

•  At present, the government selects and demarcates areas it feels can be offered for bidding in an exploration licensing round.
•   In terms of exploration and production, currently around 52 per cent of India’s sedimentary basins are still unappraised and the last seismic data acquisition of the unappraised sedimentary basins was undertaken by the government nearly 25 years ago

How Open Acreage Licensing (OAL) will work?

•   Under the open acreage licensing (OAL), companies can visit NDR and look at vast seismic data of currently producing fields and explored areas as also those of unexplored areas
•   From the areas that are not under any licensee, they can then carve out an area suitable to them and evince interest in doing exploration and production.
•   Once an area is selected, the government will put it up for bidding and any firm offering the maximum share of oil or gas produced from the area would be awarded the block.

Role of National Data Repository (NDR)

• The NDR will be wholly funded by the government of India and housed with the Directorate General of Hydrocarbons (DGH).
•   It will have the ability to store data online, near line and offline, and provide independent web-based access.
• The mammoth volume of data collected by E&P companies and other agencies over more than six decades of activities was hitherto lying scattered at different work centres of ONGC, Oil India and DGH or held by the operating companies.
•  This necessitated an establishment of a system at national level that could assimilate, preserve and upkeep the vast amount of data which could be organised and regulated for use in future exploration and development, besides use by R&D and other educational Institutes. And hence the government initiated the establishment of the NDR.

Current Scenario

• The recently unveiled Open Acreage Licensing Policy and the National Data Repository together are a significant and welcome step towards opening up the hydrocarbon exploration and production industry in India.
•  By placing greater discretion in the hands of explorers and operators, the Licensing Policy attempts to address a major drawback in the New Exploration Licensing Policy, which forced energy explorers to bid for blocks chosen by the government
•   Companies can now apply for particular areas they deem to be attractive to invest in, and the Centre will put those areas up for bids.

What are the Benefits?

•  This is more attractive for prospective operators because in the past, the blocks chosen by the government often were large swathes of land or sea in which only a small fraction had hydrocarbon reserves
•  By offering companies the freedom to choose exactly the areas they want to explore, and their size, the government has a better chance to woo serious energy investors in an effort to help achieve a more cohesive framework of the country’s energy security
•   Besides allowing potential investors to make informed decisions, this will open up a new sector in India.
•  There are a number of companies around the world that make it their business to simply explore hydrocarbon basins and sell the information they gather. The new initiative seeks to incentivize such prospectors.

The Liberalization Process

•  Companies will be allowed submit applications through the year and not just at designated and often infrequent points, as was the case earlier.
•   The auctions will be held twice a year for now; the frequency could be increased as soon as the industry grows accustomed to the new system. This will lend more flexibility to the industry.

Concerns

•  There are still some concerns about the implementation of the overall Hydrocarbon Exploration and Licensing Policy
•  The policy awards an extra five points to bidders for acreage if they have already invested in the exploration and development of that area, but it is doubtful if this is enough of an incentive, since the investment needed to simply explore is significant.
•   By contrast, no such preference is given to mineral explorers while auctioning mining rights — instead, a revenue-share from mining operations is their recompense for exploration efforts.
•  This could be considered for the hydrocarbon sector as well.
•  Another concern is whether India can attract enough investment to meet the government’s objective of reducing oil imports by 10% by 2022
• And the competition that India faces from Gulf of Mexico that weakens the investor inclination for Indian acreage.