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New regime, old pace: oil exploration cos say clearances still slow to come by

The Ambani brothers are not the only ones lamenting about stuck projects in India. Domestic and international energy companies say that despite almost ten months of Modi government nothing has changed on the ground for the oil and gas industry.

“This government’s emphasis on development is a mere lip service. Neither are the regulatory authorities nor partner companies planning to better the working conditions and increase production. Files are pending for ever and fields are lying without production,” said the Managing Director of a domestic exploration and production company, which is looking to expand abroad. 

The company partners Hindustan Oil Exploration Company (HOEC) in one of its key blocks. HOEC’s block PY-3 has not seen any production since 2011. 

“It’s a prolific block but thanks to the objections from various parties, production has been shut for nearly four years while we are importing crude oil,” he added.

Partners say earlier there was a dispute with the Directorate Genaral of Hydrocarbon, but now the participating companies are objecting to various provisions. 

“Only the licensee was to pay the cess and royalty. Now the partner companies are asked to share cess and royalty. To make more profit, contract terms cannot be changed arbitarily. Nothing has changed with the change in government,” said an official from HOEC.

PY-3 had been producing high quality light crude oil (49° API) at a rate of 3,300 bopd prior to its shutdown in July, 2011. 

“Restarting production from PY-3 field has been a high priority and HOEC has been working proactively with all the joint venture partners to achieve this objective,” HOEC said in a statement on the website.

HOEC had a total income of Rs 627 million, around 48% less than the previous year, primarily on account of lower production in PY-1 due to steeper decline in reservoir pressure and higher water ingress in existing producer wells. 

Eni, the Italian petroleum exploration and production company, which holds 47.18% in Hindustan Oil Exploration Company (HOEC), has been planning to sell its stake in HOEC for sometime now. 

Another international firm, which partners Reliance Industries in a few blocks, says it is not interested in being in the country any longer.

“When we came to India, we were very positive about the prospects. We were promised a great deal but nothing has worked so far. We have been forced to exit India,” said the CEO the international exploration and production firm on the condition of anonymity.

Canada’s Niko Resources is another company which is evaluating plans for its oil and gas assets in India. Niko owns 10% in the D6 block, off the eastern coast of India. BP Plc has a 30% stake in the block, while the rest is owned by Reliance Industries Ltd. (RIL). The company also holds a stake in the Hazira field in western India. 

“We are disappointed by the way the government is working in India. Nobody is interested in business and progress,” said a senior official from another international company on the condition of anonymity.

BP Plc has already written down the value of its investment in eastern offshore KG-D6 block by $ 790 million besides another $ 830 million in impairment charges, following lower-than-expected gas price hike.


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