India’s Oil and Gas Sector Receives $ 36 Billion Investment: Petroleum Ministry
India’s focus on oil and gas sector has pulled in over $36 billion in investment and yielded 177 hydrocarbon discoveries, according to a new report from the Petroleum Ministry. Central to this increase in investment was the New Exploration Licensing Policy (NELP), which allowed bidders to recover all costs prior to profit distribution — a strategy that transformed India’s upstream energy industry until it was revamped in 2016.
In 2016, the cost-recovery NELP model was discarded in favor of a revenue-sharing contract (RSC) framework. Within this new system, blocks are granted to firms promising the largest portion of output to the government, irrespective of their exploration and development costs.
From 1999 to 2010, the nine NELP bidding rounds granted 254 blocks, drawing $17.6 billion in exploration funding, PTI stated. This resulted in 67 oil discoveries and 110 gas discoveries. An extra $18.64 billion was allocated to advance several of those sectors.
In contrast, the eight rounds of the Open Acreage Licensing Policy (OALP) between 2018 and 2022 granted 144 blocks, leading to merely 6 oil and 4 gas finds, with an overall exploration expenditure of $1.37 billion.
NELP blocks were accountable for many of India's most important discoveries. Reliance Industries (RIL) and BP Plc’s eastern offshore KG-D6 block, responsible for one-third of India's natural gas production, along with ONGC’s KG-DWN-98/2 (KG-D5) block, were both granted under this system.
The Joint Working Group on Ease of Doing Business in the upstream sector states that NELP played a crucial role in increasing exploration areas and attracting foreign and private investment into India's E&P sector.
Prominent global firms including British Gas, Cairn Energy, Eni, BHP Billiton, and BP took part in the NELP bidding rounds, introducing cutting-edge exploration technologies and investment into India's upstream sector.
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Nonetheless, NELP faced its own set of problems. A key problem was the hold-ups in securing clearances, such as environmental and regulatory approvals, which frequently caused considerable project delays. Conflicts regarding cost recovery made operations more complex, as differing interpretations of contracts resulted in standoffs between the government and companies.