India in rush to boost oil production before energy transition

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India will radically reform regulations and invite foreign oil majors to explore both onshore and offshore as it races to extract as much oil as possible while there remains a market for crude, the country’s oil and gas minister has said.

“I was with Exxon yesterday. I was with BP a few days earlier. I have had meetings with Chevron [ . . .] I went to Brazil and had a discussion with Petrobras,” Hardeep Singh Puri told the Financial Times’ Energy Transition Summit India in Delhi.

“I said you come, join Oil India prospecting off the Andaman waters. Don’t make any investment, just come in. We will incentivise them. And if you strike oil and you are a partner, you will have first right of refusal,” Puri added. 

The minister said India had “several” oilfields the size of ExxonMobil’s 11bn barrel discovery in Guyana waiting to be found and that the country needed to move quickly to tap them before the world switched to other forms of energy in order to hit net zero climate targets.

“At the end of the day it’s a race,” he said. “If it remains there unexploited, when the [energy] transition becomes total, there is a philosophical debate on that. I keep telling Guyana, you got a big find, but by the time the oil starts coming into the market, the transition already would be in a pretty advanced stage.”

The Indian minister’s remarks appear to signal that Prime Minister Narendra Modi’s government intends to make up for lost time in offshore oil exploration and production, where some investment has been deterred by fluctuating regulations and persistent red tape.

Estimates of India’s potential oil wealth differ hugely. S&P Global Commodity Insights believes there may be as much as 22bn barrels of oil in unexplored basins. Rystad, an energy consultancy, puts the figure at just under 8bn.

Meanwhile, analysts at the International Energy Agency are pessimistic about the chances of a significant increase in the country’s 700,000 barrels per day of production.

“In part, the absence of international companies may be due to lacklustre discoveries since the turn of the century,” they wrote, in their annual Indian Oil Market outlook. Over the past 23 years, 2bn barrels of oil have been discovered in India, compared with 10bn in each of Angola, Norway and Guyana and 40bn in Brazil.

“Against the backdrop of capital discipline, major players may be waiting on the sidelines for a world-class find before establishing operations in the country,” they added.

Puri, who promised in July more than $100bn of investment opportunities in the sector by 2030, is trying to reduce India’s overwhelming dependence on imported oil. 

“We just took our eye off the ball. There was neglect,” he said. Only 10 per cent of India’s potentially oil-producing basins were being explored, while the country imported 85 per cent to 88 per cent of its oil and spent $150bn a year on foreign energy resources, Puri said.  

To trigger more oil exploration, he said he would radically change India’s legal framework. “We sat down with the majors and said: ‘Look, guys, tell us which are the areas where you want tweaking in policy?’ In the next session (of parliament), which will be fully next month, I will get that bill passed and it will be enacted into law,” he said. 

The proposed legislation reforms regulation of oilfield development to protect companies against sudden windfall taxes and gives them the right to arbitrate any disputes outside India, among other changes.

Puri said India had also opened more than a million square kilometres that were previously “no-go areas” because of military or other restrictions, and had put “all the data which people require” on a repository at the University of Texas in Houston. 

BP, Reliance and Vedanta were among the companies that submitted bids this year in India’s ninth licensing round, for nine onshore blocks, eight shallow-water blocks and 11 ultra-deepwater blocks. Puri said 38 per cent of the bids were for areas that were previously restricted. 

Foreign oil companies are hoping India’s status as one of the world’s fastest-growing big economies will underpin future demand for crude. “India is growing and looks very, very healthy,” said Darren Woods, chief executive of ExxonMobil, at the company’s last results call.

“India is where the real growth is going to come, so it has an underlying advantage,” said Puri. He promised that a 10th auction round for licences would swiftly follow once parliament has passed his legislation.