Two weeks ago, we reported that a long exploration effort has led to the reportedly massive discovery of oil and gas reserves in Pakistan’s territorial waters, a cache so large that it is said it could change the economic trajectory of the beleaguered country. Although Pakistan’s hydrocarbon resources are yet to be quantified, some estimates suggest that this discovery constitutes the fourth-largest oil and gas reserves in the world.
However, the oil majors appear unimpressed: in July, the country’s Petroleum Minister, Musadik Malik, told a parliamentary committee that no international companies were interested in offshore oil and gas exploration in Pakistan,and those in the country largely had the exit door in view. It comes down to security, and risk versus reward with Malik explaining to the committee that the cost of security is a major deal-breaker because “in areas where companies search for oil and gas, they have to spend a significant amount to maintain security for their employees and assets.”
Thankfully for Pakistan’s neighbor, India has no such baggage. India’s oil Minister Hardeep Singh Puri has called for oil majors to step up oil and gas exploration in the country to help cut India’s reliance on imports and make affordable fuel sustainable.
“E&P offers investment opportunities worth USD 100 billion by 2030,” he told a conference at Urja Varta.
Currently, only 10% of India’s 3.36 million sq km wide sedimentary basin is under exploration. However, the country is richly endowed with fossil fuels: back in July, S&P Global Commodity Insights revealed that four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil. In effect, lesser-known Category II and III basins, namely Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan contain more oil than the Permian Basin, which has already produced 14 billion barrels of its 34 billion recoverable oil reserves.
Rahul Chauhan, an upstream analyst at Commodity Insights, has emphasized the potential of India’s unexplored Oil & Gas sector, “ONGC and Oil India hold acreages in the Andaman waters under the Open Acreage Licensing Program (OALP) and have planned a few significant projects. However, India still awaits the entry of an international oil company with deepwater and ultra-deepwater exploration expertise to participate in current and upcoming OALP bidding rounds and explore these frontier regions,” he has declared.
Big Oil Kicks Off India Exploration
India boasts significant discoveries in the Krishna-Godavari, Barmer, and Assam basins, but exploration in other areas has been slower to develop. Of India’s 3.14 million square kilometers of sedimentary basins, 1.3 million sq km are in deep waters. India had its first foray into deepwater exploration in the Bay of Bengal earlier this year in the Krishna-Godavari Basin, courtesy of India’s state run Oil and Natural Gas Corporation (ONGC). ONGC said it was planning to spend over $10 billion developing multiple deepwater projects in its KG-DWN-98/2 block in that basin.
Meanwhile, state-owned upstream company Oil India Ltd is looking to start exploration activities in Nagaland
“We have a total of 30 blocks under the OALP. We have already drilled all wells under the awarded OALP blocks, except in Nagaland. We are pursuing the ministry and they have set up a high power committee involving OIL, ONGC, government officials, to discuss the issue with the Government of Nagaland and resume exploration,” the official said.
Unlike Pakistan, India is likely to have little trouble attracting the oil and gas majors. Indeed, British energy giant BP Plc (NYSE:BP) is holding a board meeting in India this week, as it hunts for more opportunities in the country. BP has forged a joint venture with Indian multinational conglomerate Reliance Industries to operate 1,900 fuel retail stations across India and produces oil and gas from a deepwater block in the Krishna-Godavari basin. The JV has teamed up with ONGC to bid for exploration rights for an offshore block in India.
National oil companies (NOCs) account for 58% of global reserves and 56% of production. However, International Oil Companies (IOCs) also play a major role in the energy sector by contributing to the general economic and social development of the host country. Indeed, IOCs are obliged through Production Sharing Agreement to pay royalty fees to the host country.
Analysts have predicted that India is set to become the key driver of global oil demand growth, overtaking China.
“China’s role as a global oil demand growth engine is fading fast,” Emma Richards, senior analyst at London-based Fitch Solutions Ltd, told The Times of India. According to the analyst, over the next decade, China’s share of emerging market oil demand growth will decline from nearly 50% to just 15% while India’s share will double to 24%.
A rapidly growing population, which has likely surpassed China’s, is expected to be the main driver of consumption trends in India. Meanwhile, the country’s transition from traditional gasoline and diesel-fueled transport is expected to lag other regions, in sharp contrast to China’s skyrocketing adoption of electric vehicles and clean energy in general.
“India was always going to exceed China in a matter of time in terms of being the global demand growth driver, mainly due to demographic factors like population growth,” Parsley Ong, the head of Asia energy and chemicals research at JPMorgan Chase & Co. in Hong Kong, has told Bloomberg.
By Alex Kimani for Oilprice.com