Indian Marginal Field Auction Launched

An update to our previous post, the Discovered Small Fields Bid Round has officially been launched by the Directorate General of Hydrocarbons, offering 67 discovered fields over 46 Contract Areas, 18 of which are located within shallow waters. The fields collectively hold approximately 372 MMBO and 1.9 trillion scf of gas with the biggest single oil discovery D-18, located offshore Mumbai, containing 108 MMBO reserves. The fields have remained undeveloped for years due to their limited reserves, high development cost and technological constraints, and were relinquished from ONGC and Oil India.

The data room opened to possible bidders on the 6th of June and bids will be accepted between 15th July and 31st October 2016. By the end of 2016, the winners will be awarded the fields and contracts signed in January 2017. The winners will have to start production from the fields in three to six years depending on the difficulty of the location.

“Investors are enthusiastic,” according to oil minister Dharmendra Pradhan at the launch of the Round, referring to the response received from potential investors in a series of consultations he had held with them. The investor roadshows leading up to the auction will be held in Mumbai, Bengaluru and Guwahati.

The winners in the auction will have to compensate ONGC and Oil India an equivalent of the book value of the respective discoveries, although in most cases the book value is nil, an official said. The areas will be held under a new Revenue Sharing Contract, whilst the ministry said there is no mandatory prior technical experience required for the bidder nor is there any mandatory work program. There will be no cess (a tax or levy), and minimal royalty is in line with earlier New Exploration Licensing Policy. Furthermore, it’s said that goods and services imported for petroleum operations will be exempted from custom duty.

The auction of small fields is aimed at boosting the domestic oil and gas output in the country which imports nearly 80% of crude oil and 30% of gas required for its consumption. The government is aiming to bring down India’s oil import dependence to 67% of the total consumption by 2022.

For further information on the bid round, the Directorate has set up the Discovered Small Fields Portal.