As part of this investment to reduce India’s dependency on imported oil and natural gas, the Central Government is also developing an ambitious ₹80,000 crore incentive package to accelerate deepwater and ultra-deepwater oil and gas exploration in India. The proposed scheme is expected to give a huge financial boost to exploration companies and produce more domestic oil and gas as well as attract international investment to India’s energy sector.
The proposal, which is being brought to the Ministry of Petroleum and Natural Gas, is part of the National Deepwater Exploration Mission (Samudra Manthan), or Deepwater Exploration. The scheme will also unlock untapped offshore hydrocarbon reserves and improve India's long-term energy security, officials said.
Government may bear up to 50% of drilling costs
The best part about the proposed package is that the government would cover up to 50% of the drilling cost for deepwater exploratory wells.
Deepwater exploration is one of the most expensive and risky activities in the oil and gas industry. An exploratory well can cost anywhere between ₹1,000 crore and ₹1,200 crore, and ultra-deepwater drilling projects may cost much more.
To avoid excessive expenditure, the financial assistance for each well is expected to have a predefined cap. The government is also considering partial funding for 3D seismic surveys, which are essential for identifying potential oil and gas reserves beneath the seabed.
The proposal is currently being discussed in a number of ministries and will be put before the Union Cabinet once all approvals are completed.
Why India needs the plan?
India is one of the world’s fastest-growing major economies, and its energy needs are growing in pace every year.
Although efforts are made to develop domestic production, the bulk of India's crude oil and natural gas requirements are still imported. India is so heavily dependent on imports that it has to cope with global price fluctuations and geopolitical tension.
Recent developments in West Asia have once again shown us how international conflicts can sharply increase crude oil and natural gas prices, leading to inflation and putting pressure on the Indian rupee.
The government will try to help reduce these vulnerabilities by raising domestic exploration and production and eventually developing long-term energy independence in the process.
Reducing risks for investors
Deepwater exploration carries enormous financial risks because there is no guarantee that commercially viable oil or gas reserves will be discovered after drilling.
This uncertainty is often the reason that domestic and international companies are not investing in offshore exploration.
As such, the government is looking for this incentive package to reduce the financial burden in the startup stage of exploration, which will make India more attractive for international energy companies.
And, most importantly, incentives will be available to both public sector and private sector companies and will provide a level playing field for investment.
ONGC already in the lead
India’s largest oil and gas producer, Oil and Natural Gas Corporation (ONGC) has already taken a major step by commissioning its first deepwater exploratory well under the Samudra Manthan programme.
The project is considered a milestone in India's offshore exploration strategy and demonstrates the government's commitment to expanding domestic hydrocarbon production.
The experience gained from these projects will help improve future exploration success rates, it said.
18 offshore blocks open for bidding
Besides the incentive scheme, the government is also moving ahead with new opportunities for exploration.
Under the Open Acreage Licensing Policy (OALP), 18 deepwater and ultra-deepwater exploration blocks have been offered for auction. Interested companies can submit bids until September 17.
In order to enhance exploration efficiency, the government has invested heavily in collecting high-quality 2D seismic data from offshore areas. More so, it would also encourage private companies to use modern data processing technologies to better analyse geological information.
The first step in the direction of energy independence
The proposed ₹80,000 crore package could become one of India’s biggest initiatives to promote offshore hydrocarbon exploration.
If implemented well, the programme could encourage even more foreign investment, increase domestic oil and gas production, cut reliance on imports, create opportunities for employment and strengthen India’s energy security in the long run.
With India's economy flourishing, the stability and reliability of energy supply is the central focus of the country. The proposed deepwater exploration mission is also an investment for the future of the country as an economic development project and an energy resource to survive and grow.
