The recent signing of contracts for 11 oil and gas blocks offered under the Open Acreage Licensing Policy (OALP) Bid Round-V has brought attention to the role of this policy in accelerating Exploration and Production (E&P) activities in India. This article provides a detailed overview of OALP, its contribution to E&P, along with some concerns regarding its implementation.
Understanding the Open Acreage Licensing Policy
Approved in March 2016, the Hydrocarbon Exploration and Licensing Policy (HELP), which replaced the erstwhile New Exploration Licensing Policy (NELP), marked a significant shift in India’s approach towards hydrocarbon exploration and production. The Open Acreage Licensing Policy (OALP), launched in conjunction with the National Data Repository (NDR) in June 2017, is a key provision of HELP.
Under OALP, companies can identify and select areas they are interested in for oil and gas exploration. Expressions of interest for any area can be submitted throughout the year, but these interests are accumulated and considered three times a year. The selected areas are subsequently auctioned.
Impact of OALP on Exploration Acreage
The launch of the HELP regime, which included the OALP Bid Rounds, has significantly boosted exploration acreages in India. While earlier regimes held exploration acreage at approximately 80,000 sq. km., the figure post the award of blocks under OALP Round-V is around 2,37,000 sq. km. The OALP has been instrumental in eliminating bureaucratic hurdles and providing a significant boost to the Exploration & Production sector.
Concerns Surrounding the OALP
Despite these successes, there have been some concerns regarding the implementation of the OALP. State-owned Oil and Natural Gas Corp (ONGC) and Oil India (OIL) secured all 11 blocks offered in the latest OALP bidding round, pointing to an inadequate role of private players. The disinterest from private entities in recent OALP bid rounds is due to a lack of policy clarity from the government and unsuitable taxation and regulatory conditions. A key example is the rejection by the Finance Ministry of a proposal to reduce oil cess charges on domestic crude production.
In addition, there has been limited participation from foreign companies in India’s hydrocarbon exploration and production efforts.
Hydrocarbon Exploration and Licensing Policy Features
The HELP stipulates that exploration blocks will be awarded on a regular basis through e-bidding in a transparent manner. It introduces a revenue sharing model for hydrocarbon exploration, replacing the previous profit-sharing model. This means that the government’s share is received as soon as production begins, unlike the cost-recovery model where contractors first reclaimed costs before dividing any remaining profits.
The policy also provides a unified license for all types of hydrocarbons, choice of acreages under OALP bid rounds, and full marketing and pricing freedom of gas.
The Role of the National Data Repository
The NDR is a government-sponsored E&P data bank equipped with modern facilities for preserving, maintaining, and disseminating data to facilitate its systematic use for future exploration and development. Data stored in NDR includes Seismic Data, Well & Log Data, Spatial Data, and other data such as Drilling, Reservoir, Production, Geological, Gravity & Magnetic details.
The establishment of an NDR for India has enhanced prospects for petroleum exploration and facilitated Bidding Rounds by improving the availability and quality of relevant data.