Eighth oil exploration round sees muted participation from private players amid green economy push

The deadline for bid submission for the eighth OALP round has been pushed to May 16, 2023.

The government of India has once again pushed the deadline for submission of bids for the eighth oil and gas exploration round under the Open Acreage Licensing Policy (OALP) to May 16, 2023.

In this round, the government is offering 10 blocks. The current OALP round was launched on July 7, 2022, with the deadline for submitting bids being September 6, 2022. However, this was shifted forward several times without any explanation from the government.

Industry experts believe the extension is majorly due to lack of interest from investors for the offered blocks.

Dull participation from private players

The sedimentary basins or blocks offered in the previous bids have mostly been awarded to state-run public sector undertakings (PSUs) because of muted participation from private and foreign players.

Despite several calls by the government, private oil companies have been hesitant to bid for the blocks. Experts believe that private players are not showing interest as the basins in India are not quite promising and would require a lot of expenditure for exploration.

Deepak Jasani, Head of Retail Research, HDFC Securities, said, “Private players have not participated in these bids as the potential for oil may not be very large in these basins. Additionally, there are too many regulatory changes (by the government).”

Jasani added that another factor for muted participation by private players is the uncertainty around the outlook for crude oil and natural gas prices.

Shift to green economy

Despite oil and gas holding a major share in the world’s energy basket, renewable energy sources are being pegged as the future.

Experts say that one of the reasons for limited interest in the OALP biddings is the global shift towards green economy.

Prashant Vashisht, Vice President, ICRA, said, “Globally, ESG (environmental, social, and governance) concerns are on top of everyone’s minds. Most of the oil and gas companies are now getting into renewable energy and rebranding themselves as energy companies rather than oil companies.”

With the world pushing for a carbon-neutral economy, investors are very cautious of investing in new oil fields, said Jasani.

Government push

The government of India has been frequently conducting OALP rounds to boost domestic oil and gas production as the county is a net importer of both, crude oil and natural gas. India depends on imports to meet about 85 percent of its crude oil needs.

To increase exploration and production activities in India, the government is actively reaching out to companies to invest in sedimentary basins.

Till now, the government has conducted seven OALP rounds and awarded 134 exploration and production blocks covering over 2,07,691 square kilometres of area across 19 sedimentary basins.