India woos big firms as it frets about $150 oil

India wants global companies including Exxon Mobil Corp and Chevron Corp to explore for oil and gas in the South Asian nation on concern that crude prices may soar to $150 a barrel and curb record economic growth.

"We're trying our best to get the oil majors to bid," V.K. Sibal, director-general of hydrocarbons, said in Mumbai yesterday at an event offering 57 oil and gas areas for auction.

India, Asia's third-biggest oil consumer, is competing with African and South American nations to attract global explorers to seek reserves as decades-old fields in North America and the North Sea begin to dry up. India wants Chevron, Exxon and BP Plc to bid for the first time as local companies don't have the technology to search in deep waters and remote regions.

"The government has done all it can to make the bidding criteria attractive to deepwater operators," Giles Farrer, an analyst at UK-based Wood Mackenzie Consultants Ltd. "This is likely to promote more competition for deepwater acreage, where only Reliance, Santos and Oil & Natural Gas have won blocks in previous rounds."

This auction, the seventh since the government first invited bids in 1999, was delayed twice last year, pushing back discoveries to reduce dependence on imports as oil prices soar. India, the world's fastest-growing major economy after China, depends on imports for 70 percent of its oil needs.

Oil gained 57 percent last year, crossing $100 a barrel.

Crude oil for February delivery rose as much as 65 cents to $95.74 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $95.72 at 2:44 pm in Singapore.

"In the next two to three years we expect prices to reach $150 a barrel," Oil Secretary M.S. Srinivasan said yesterday. "Given this scenario, we are putting in more efforts in our exploration and production."

A boom in exploration tripled rig usage over the past four years, adding to a global shortage and causing delays in tapping petroleum reserves in Indian waters. The cost of renting rigs has tripled since 2005 for contracts extending to 2012.

The non-availability of rigs and concerns over the transparency of the bidding process were cited by Sibal last year as reasons for the auction delay. India may extend the drilling schedules by three years for explorers that won areas in the previous auctions because of the rigs shortage, Srinivasan said.

We expect "exponential growth" in the number of bids to explore in India because of a transparent system, Sibal said.

India opened a total 165 areas for exploration in the previous six rounds of bidding, which yielded 49 oil and gas finds, Sibal said. BG Group Plc, the United Kingdom's third-biggest natural gas producer, and Santos Ltd, Australia's third-biggest oil and gas producer, are among the companies that won acreages in the last auction.

Companies may invest between $7 billion and $8 billion in areas they secure in the latest auction, Srinivasan said. Last month he forecast $3.5 billion of investments. The previous six rounds had drawn cumulative investments of $8.3 billion.

The latest offer includes nine areas in shallow water, 19 in deep water and 29 onshore. India set April 11 as the last date for receiving bids.

Reliance joint bid

Reliance Industries Ltd, which discovered the nation's largest natural gas field in 2002, may bid jointly for the first time with Indian or overseas partners, P.M.S. Prasad, the company's president for oil and gas, said yesterday.

The group expects to start production from its existing fields this year. The output may double the nation's supply of natural gas.

Oil & Natural Gas Corp, the nation's biggest explorer, plans to bid for about 40 of the 57 areas offered, Chairman R.S. Sharma said.

Cairn India Ltd, which has discovered 40 oil and gas fields so far, plans to bid for more exploration areas and develop strategic partnerships, Chief Executive Officer Rahul Dhir said.

Oil India Ltd and BG Group may jointly bid for the first time, said M.R. Pasrija, chairman of the state-run company.

Oil & Natural Gas on August 31 signed an agreement with BP, Europe's second-largest oil company, to explore oil fields. The two companies are working on an area in the Kutch region, off India's west coast, Sharma said on October 12.

Agencies

(China Daily 01/09/2008 page16)