BP Plc made its big ticket entry into India’s hydrocarbons space in 2011 by striking a partnership with Reliance Industries Ltd (RIL) across the value chain.
Three years down the line, the British energy company has seen it all – the high of bringing in huge foreign direct investment into the sector, severe criticism for being unable to raise gas output from the country’s largest gas fields, and bureaucratic bottlenecks.
In a conversation with
Relinquishments are a standard exploration and production process to high-grade upstream assets and focus on prospectivity based on initial exploration work. Joint geological reviews by BP and RIL have today ensured we have the right blocks and we continue to focus on them.
Regarding the investment, our view on the value proposition has not changed. Over the medium-term, we expect production to grow by developing the existing discovered resources in the Krishna Godavari Basin D6 block (R-Series and Satellites) and NEC-25 in the Mahanadi Basin.
Another important piece of the value proposition is the significant exploration potential along the East Coast.
How optimistic is BP about the D6 block?
KG D6 remains one of the key blocks for us on the East Coast. We are in the process of developing the R-series field for which the Government approved a development plan in August 2013. We have also initiated action for development of seven other discoveries in the block, some of which await final regulatory approval.
In mid-2013, we also made a major discovery (D-55 or MJ1) in the block and drilling of further appraisal wells is in progress. With the gas price notification and the intent to transition to market prices in the next few years, there is potential for RIL-BP to invest $10 billion in exploration and development activities across the East Coast in the next five-seven years, assuming timely regulatory approvals. This can result in quadrupling of our production by the end of this decade.
Do we see BP participating in the next oil and gas auction rounds of India?
BP, along with partner RIL, will look at the NELP (new exploration licensing policy) X round and the blocks on offer. We’ll need to evaluate the technical, contractual and commercial aspects before taking any decision on the extent of our participation.
BP has experience of working in varied fiscal regimes – revenue sharing (production-linked ) and production sharing contract regimes(cost recovery). What in your opinion is the best model in the Indian context?
Bidding in blocks depends on the risk and reward based on the potential of the areas. We believe the PSC model with cost recovery is the preferred contractual model for attracting investments in under-explored/technically challenging acreages.
Given the early stage of E&P (exploration and production) maturity in India (only 22 per cent of acreage is well explored), companies need to have the balance of risk and reward through a stable framework to invest capital.
What should be the global gas pricing mechanism that India should adopt?
India’s biggest need is to increase its domestic energy supply. It’s in India’s interests to incentivise production of as much domestic gas as possible.
We believe complete price deregulation will be a critical factor in increasing activity and the resulting hydrocarbon supply. This could have the potential to unlock 100 trillion cubic feet of domestic gas resources – a $1.5- trillion prize for India in terms of avoided energy imports. This will be a win-win for the country – 80-85 per cent of the total revenues will go back into the economy through Government revenues and employment generation.
How constant are technological changes in this business?
Technology is the most important factor in oil and gas exploration. It is constantly evolving and enables us to find more oil and gas, develop our projects efficiently and enhance recovery from the existing fields. Most of India’s hydrocarbon resources are in highly technically challenged and frontier areas –deepwater and high pressure/high temperature.
Doing business in India is not new to BP. Where does India feature in BP’s global strategy?
BP has had a longstanding presence in India through Castrol. With our many investments in India, we have an 8,500-strong team. We see three sources of value for our gas alliance in India besides current production from the existing fields – first from medium-term opportunities for developing the discovered gas; second, from finding new oil and gas; and third from establishing our gas marketing joint ventures.