Realtor turns oil producer as India eyes domestic production boost
NEW DELHI (Bloomberg) -- A drugmaker, a real estate developer and an edible oil company are among firms answering India’s call to tap undeveloped oil fields and become the newest explorers in the world’s fastest-growing energy consumer.
As many as 42 companies bid in the country’s auction round that closed Nov. 21. They are vying for 34 of 46 discovered oil and gas fields with estimated reserves of more than India’s total annual output, according to a government statement.
“A lot of the bidders are first time players in oil and gas,” Atanu Chakraborty, the head of oil regulator, Directorate General of Hydrocarbons, said in a phone interview on Tuesday. “Our intention was to create about five new oil and gas companies through this auction, and I’m sure we can do that.”
Prime Minister Narendra Modi is striving to woo investors to help boost oil and gas production from local fields as he targets to reduce overseas energy purchases by 2022. India’s $2-trillion economy imports more than 80% of its crude requirement and a heavy reliance on imports risks its status as the fastest-expanding major economy in the world. The International Energy Agency expects the country to be the fastest-growing crude consumer in the world through 2040.
Of 37 non-state companies that have bid, 32 are domestic and five are international, Chakraborty said. These include Sun Petrochemicals Pvt., a privately owned company formed by the directors of drugmaker Sun Pharmaceuticals Industries Ltd., Megha Engineering & Infrastructure Ltd., Enquest Drilling Pvt. and real estate firm Cheval Developers Pvt.
Cheval Developers Pvt., a real estate firm based in Ahmedabad, in the western state of Gujarat, is vying for five discovered fields.
“The real-estate sector is in a bad shape, and I was looking for other opportunities,” director Nishit Patel said by phone. “Oil has changed the fortunes of many. I’m betting on that.”
Nippon Power Ltd. bid for eight fields, including three in the northeastern state of Assam, according to a government statement. Explorers Bharat Petro Resources Ltd., Cairn India Ltd. and Hindustan Oil Exploration Co. will compete with the company in some of the areas even as larger established companies like Reliance Industries Ltd. and Oil & Natural Gas Corp. have stayed away.
The foreign bidders include the local unit of Hardy Oil & Gas Plc. All the companies mentioned in this story confirmed bidding for the auction.
P. Elango, managing director of Hindustan Oil Exploration Co., said the government’s decision to lower the entry barrier by removing technical qualifications helped small domestic companies.
“In the current oil price environment, no overseas company will go to a new country and invest,” he said. “The only strategy is to involve local players.”
Dominant Explorer
State-run ONGC dominates E&P in India. The biggest explorer is struggling to stem a drop in India’s oil output in recent years as most of its fields are maturing. The areas that went under the hammer were discovered by ONGC and state-run Oil India Ltd. with estimated in-place oil and gas reserves of about 625 MMbbl. They weren’t developed as the explorers focused on bigger fields.
“These new companies along with the existing producers can take India forward in fulfilling our targets,” said DGH’s Chakraborty.
Oil Minister Dharmendra Pradhan said the bids for the fields will be awarded by December-end, according to a report in The Financial Express newspaper Wednesday. India aims to sign contracts for the small fields by January, Pradhan had said in May.
