The government has started exploring crude oil in the country to reduce its crude oil bill and reduce import dependence. For this, the government has prepared a masterplan of Rs 80 thousand crores. According to people with knowledge of the matter, the Ministry of Petroleum and Natural Gas is preparing an incentive package of Rs 80,000 crore to attract foreign investment in deep sea oil and gas exploration in India. Under this, the government will bear half the cost of drilling exploratory wells.
What is the government’s planning?
This initiative, launched under the ‘National Deepwater Exploration Mission’ or ‘Samudra Manthan’, is a step ahead of the upstream reforms undertaken in the last decade. Those reforms had failed to attract major investment from global oil companies, while this new initiative will directly fund some of the exploration costs. Under this proposal, the government will refund up to 50% of the cost of digging deepwater exploratory wells. This proposal is under discussion with other ministries and may undergo changes before being presented before the Cabinet.
To prevent costs from increasing, a limit on funding will be set for each well. On the condition of anonymity, a person said that the government can also provide some funding for 3D seismic survey. The purpose of this assistance is to reduce the risks associated with exploration and to attract global companies with expertise and modern technology in deep water work.
How much does it cost to dig a well?
Due to high cost and not much success in exploration work in India, foreign companies have stayed away from it for a long time. Depending on the complexity of the land structure, drilling a well in deep water can cost Rs 1,000-1,200 crore. A few hundred crore rupees more may be spent on an ultra-deepwater well. These incentives will be available to both government and private exploration companies. ONGC on Saturday started drilling its first deep water exploration well under the ‘Samudra Manthan’ programme.
Deepwater Mastery
India is also auctioning 18 deepwater and ultra-deepwater blocks under the ‘Open Acreage Licensing Programme’. The deadline for bidding has been extended till September 17. The government hopes that by then the incentive package will be finalized. The proposal is a major change from the current exploration system, in which companies awarded blocks must complete a minimum work program (including seismic surveys and exploration wells) or face penalties.
Sometimes exploration companies decide not to drill when seismic data shows that the likelihood of commercial discovery is low. Many companies return the blocks instead of investing hundreds of crores of rupees in high-risk wells.
Along with the incentive scheme, the government is also improving the quality of geological data available to exploration companies. It has invested heavily in acquiring offshore 2D seismic data and is now considering bringing in private companies to reprocess old datasets using advanced technology.
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