Indian E&P Policy and foreign firms
The international E&P players have started to recognize the immense growth opportunity that India offers. However, they are still reluctant to enter the market because of the weak E&P policies and the various restrictions and regulations for the private companies in the Oil and Gas and Petroleum sectors. Even though NELP 7 had some changes, which would favour the entry of foreign players, the policy has remained ineffective due to several reasons.
Most of the blocks (about 50%) offered under NELP are recycled blocks, i.e. blocks returned back to government by previously allotted players due to reasons such as lack of funds, inability to explore, etc. The foreign players look at these recycled blocks as if the previous owner couldn’t find anything upon exploration and thus returned the same back to government. Hence, these foreign players have very little interest in such blocks. In fact, even the domestic players have shown resistance to bidding for these blocks. Thus, unless the government provides clear reasons for why the recycled block is being offered by showcasing supporting geological data, and exploration reports by the previous owner, we believe that there is no point in bidding for these recycled blocks and such blocks will remain unsold as even domestic players won’t bid for them (more so because most of these recycled block are from ONGC, the leading national E&P player).
The next major issue is the prevention of the development of integrated business models, which has been the preferred mode of operation by the major foreign players, such as Exxon and BP, recently. The policies and regulations, such as fuel prices, etc. prevent the bidding companies from undertaking all the tasks from exploring to refining to selling of oil to providing related services. Thus, if the major players decide to enter the…...