Roadblock in Barmer

Clear norms needed to raise output.

The reported move of 30% partner ONGC to block $500 million in payments to Cairn Energy, the operator at Barmer, Rajasthan, seems to point at regulatory rigidities in upstream oil exploration and production (E&P).Reportedly, what&'s alleged is inflated expenditure under various heads, including in-pipeline construction.We do need clear-cut norms, transparency and proactive regulatory oversight to shore up resources and investment in the high-risk and capital-intensive E&P sector.The directorate general of hydrocarbons is mandated to verify and review E&P works programme and attendant budget of fields and blocks.Abroad, in the more mature hydrocarbon licensing regimes, there are, in addition, detailed codes of conduct in place for licensees, with the specific purpose of promoting positive commercial behaviour, and to minimise disagreements over costs, overheads and day-to-day field operations.We surely need similar codes of practice for operators in sedimentary basins here.The objective ought to be to require that licensees adopt a non-blocking approach and actively promote the principle of cooperative value generation in E&P activity.Complying with codes of conduct in operations would be mutually beneficial and better focus managerial resources and skills.It is not clear if audited accounts have been contested in the particular instance.As per the model productionsharing contract, Article 25 says that the licensee shall submit the audited accounts to the managing committee.Anyway, Barmer is our biggest oil find in well over two decades, and we need to fast-forward production and investment in the promising basin. Just as important, smooth ongoing operations would boost investor interest for E&P activity in the country, both on- and offshore. Note that almost half our sedimentary basins remain unexplored.Also, preliminary raw-data estimates suggest there may well be 10 billion tonnes of crude oil and 1 trillion cubic meters of natural gas in situ in Indian waters, enough to meet our needs for over a whole decade and more.So, the upside from the stepped-up E&P activity can be huge, given the fact that we now import almost 80% of our crude requirements annually.