Govt plans Rs 80,000 crore package to attract deepwater oil explorers

New Delhi: The petroleum and natural gas ministry is drawing up an Rs 80,000-crore incentive package to attract foreign investment into India's deepwater oil and gas exploration by bearing up to half the cost of drilling exploratory wells, according to people familiar with the matter.

The initiative, under the National Deepwater Exploration Mission, or Samudra Manthan, goes further than the series of upstream reforms over the past decade, which failed to attract significant investment from global oil firms, by directly funding part of exploration costs.

Under the proposal, the government will reimburse up to 50% of the cost of drilling deepwater exploratory wells, the people said. The proposal is being discussed with other ministries and could change before it is placed before the cabinet.

Funding per well will be capped to prevent cost overruns. The government may also partly fund 3D seismic surveys, according to one of the persons, who did not wish to be identified.

The support is aimed at reducing exploration risk and attracting global companies with deepwater expertise and advanced technologies.

High costs and India's modest exploration success have long kept foreign firms away. Drilling a single deepwater well can cost Rs 1,000-1,200 crore, depending on geological complexity. An ultra-deepwater well can cost a few hundred crore more. The incentives will be available to both state-run and private explorers.

ONGC on Saturday spudded its first deepwater exploratory well under the Samudra Manthan programme.

Deepwater Expertise

Funding per well will be capped to prevent cost overruns. The government may also partly fund 3D seismic surveys, according to one of the persons, who did not wish to be identified.

The support is aimed at reducing exploration risk and attracting global companies with deepwater expertise and advanced technologies.

High costs and India’s modest exploration success have long kept foreign firms away. Drilling a single deepwater well can cost Rs 1,000-1,200 crore, depending on geological complexity. An ultra-deepwater well can cost a few hundred crore more. The incentives will be available to both state-run and private explorers.

ONGC on Saturday spudded its first deepwater exploratory well under the Samudra Manthan programme.

India is also auctioning 18 deepwater and ultra-deepwater blocks under the Open Acreage Licensing Programme. The bid deadline has been extended to September 17, by when the government expects to finalise the incentive package.

The proposal marks a significant departure from the existing exploration regime where companies with awarded blocks are required to complete a minimum work programme, including seismic surveys and exploratory wells, or face penalties.

Explorers sometimes choose not to drill after seismic data points to a low probability of a commercial discovery. Many surrender blocks rather than invest hundreds of crores in a high-risk well.

Alongside the incentive scheme, the government has been improving the quality of geological data available to explorers. It has invested heavily in acquiring offshore 2D seismic data and is now looking to bring in private companies to reprocess legacy datasets using advanced technologies.