India hoping for firm interest at latest oil, gas auction amid policy continuity

India is hoping that its latest round of oil and gas block auction will generate robust interest among investors and bidders, as the return of the National Democratic Alliance government for the third consecutive time would ensure policy continuity.

New Delhi has extended the bid submission deadline for the second time in the ninth round of the Open Acreage Licensing Policy, highlighting lukewarm response from exploration companies to the oil and gas block auction process.

The latest round started invited applications on Jan. 3 with the original closing date set for Feb. 29 but the deadline was first extended until May 15. Now, the latest date for bid submission has been further extended to July 15.

Narendra Modi on June 9 was sworn in as the prime minister and the leader of Bharatiya Janata Party-led NDA government for the third straight term -- a result that is expected to ensure policy continuity for the energy and commodity sectors.

The BJP-led alliance won a relatively lower number of seats compared with the previous elections in 2019, while the opposition alliance sharply improved its performance from the previous polls.

Clarity after elections

Petroleum ministry officials are hoping that more interest might emerge to the auction round now.

In OALP-IX round, a total of 28 blocks spread over 136,596 sq km were offered for oil and gas exploration at eight sedimentary basins where the companies taking part will have the freedom to carve out areas for drilling.

Out of the total 28 blocks offered for bidding, 9 blocks are on-land, 8 blocks are in shallow water and 11 blocks are in Ultra-Deep-water.

Analysts said that the bidding process had slowed down due to the elections. The extension of the bid submission date to July 15 was an attempt to carry out the final process of awarding the contracts once the new government was in place.

The blocks are expected to be awarded by September, said an official of the Directorate General of Hydrocarbons, the upstream market regulator.

The extension of the bid deadline twice did not come as a surprise to industry participants as the bids in the previous round -- OALP-VIII -- opened in July 2022 but the blocks were awarded to the winners earlier this year after multiple extension of the bid submission deadlines.

Upstream policy

Under the OALP regime, India allows upstream companies to carve out areas for oil and gas exploration. Exploration companies can put in an expression of interest for any area throughout the year. The areas sought are then put on auction.

In the previous eight rounds, India awarded 144 oil and gas blocks offering around 242,055 sq km for exploration.

Since 2016, the auctions of OALP rounds have been taking place under the Hydrocarbon Exploration and Licensing Policy -- or HELP -- that invites expressions of interest in any area that is not under production or exploration license.

On the upstream segment, India is accelerating its push to ensure energy security at a time when geopolitical turbulence and clean fuels are altering the global energy landscape. But analysts and trade sources are of the view that New Delhi has an uphill task at hand.

Upstream output has been declining nearly 1.1% on a compound annual rate over the past 10 years due to a natural drop in mature fields as well as the lack of monetization of existing discoveries and a reduced number of new discoveries, according to S&P Global Commodity Insights.