Innovate in oil and gas

Needed: new licensing norms.

The decision of the Cabinet committee on economic affairs to okay a three-year moratorium on exploratory and appraisal drilling for oil and gas in Indian waters suggests pragmatism. There is a global shortage of deepwater rigs, and the sheer lack of resources would affect operators across the board.

But the move points at scope for proactive policy in the high-risk and capital-intensive upstream oil and gas sector. Specifically, there’s case for a new ‘promote licence’ in prospecting for hydrocarbon finds, sans the commitment levels for seismic and drilling activity required in the usual oil and gas production licences.

The idea is to provide a period, say 2-3 years, during which licensees would be able to gauge geological prospects, largely using existing data sets, without having to undertake substantial seismic or drilling operations at an early stage.

Our large and extensive sedimentary basins offer a wide range of investment opportunities for exploration and development activity, with tens of billion tonnes of hydrocarbon resources known to be in situ as per ‘raw’ geological data. Recent gas finds in the Krishna-Godavari basin also present ample possibilities of large finds.
    
However, the fact of the matter is the geo-technical challenges and risks presented by the available opportunities — complex geological structures and limited or even outdated data — can be considerable.

And turning the risk opportunities into drillable prospects or workable projects does call for dedicated geophysical study and analysis, but also innovation in licensing norms. The point is that with sparse data, potential bidders may not always be keen to carry out extensive seismic surveys or drilling of new wells, termed works programme.

It is true that in recent auction rounds, the weightage for the works has been reduced. But the fact remains that there’s provision for steep penalties on not sticking to the works schedule.

The concept of promote licence would likely enthuse more bidders, including smaller upstream specialists, to explore specific blocks without onerous financial commitment. In any case, it would be pointless to keep drilling more wells simply to keep to a prior timetable.