India faces challenges in trying to reduce dependence on crude import: Report

India’s ambitious target of lowering its crude import dependence continues to face challenge, according to a report by S&P Global Commodity Insights on Friday.

India is the world’s third-biggest oil importer, relying on foreign supplies to meet more than 85% of its demand.

Noting that in early October, India offered 26 new oil and natural gas exploration areas for bidding, in sync with a strategy to cut crude import dependence, Nick Sharma, executive director for Upstream Solutions at S&P Global Commodity Insights, said that given any block uptake by potential investors will take time to realize. “The Indian government’s ninth bidding round is promising to an extent, given that 24 of the 26 blocks on offer have basins with reserves with production or contingent resources pending commercial production,” said Sharma.

“In addition, investor interest has also been kept in mind, with eight blocks being carved out as part of expressions of interest submitted by companies. However, the fundamental challenge of reducing crude import dependence remains, given any block uptake by potential investors will take time to realize,” he added.

The latest rounds are under India’s Open Acreage Licensing Policy, or OALP, under which companies are allowed to carve out exploration areas. Companies can put in an expression of interest for any area throughout the year. The areas sought are then put on auction.

The eighth round of the OALP was launched in July, and offered 10 blocks spread over 36,316 km. The government is yet to announce the winners of the eighth round.

“Companies will need to rework the geological data to identify suitable prospects and drill them, followed by a path to final investment decision, which means that any expectations that crude import dependence can be bridged in the short to medium term, is going to be difficult to realise,” Sharma said. “However, if a longer-term horizon is considered, then Category 2 and 3 basins could provide the necessary ingredients for exploration success.”
Source: Livemint