NELP VII : Future of Oil exploration

In the recently concluded NELP VII round of bidding under the new exploration licensing policy (NELP) the government has offered 57 oil & gas blocks under NELP-VII. This included 19 deepwater blocks, 29 are onland blocks and nine blocks are in shallow water. 

NELP So far

In previous six rounds, the government awarded 162 blocks. So far, the largest commitment of $3.32 billion investment was received in under NELP-VI where 52 blocks was awarded. Under NELP rounds, 49 oil and gas discoveries have already been made in Cambay onland, North East Coast and Krishna Godavari deepwater areas, accreting over 600 million tonnes of reserves.

NELP VII

Out of 19 deepwater blocks, GVK-BHP got seven blocks, ONGC bagged three blocks and Cairn has been lucky with one deepwater block and BP-RIL bagged one. There has been no takers for seven deepwater blocks. The bidding round (launched on December 13, 2007) was originally scheduled to be closed on April 11. The deadline was first extended to April 25, later it was changed to May 16 and finally to June 30. 

Big player Missing from Show

Big oil companies like ExxonMobil, Chevron, Total and Shell, among others, preferred to stay away.

New entrants like LN Mittal (one block with HPCL), BHP Billiton (seven blocks with GVK group), RIL-British Petroleum combine(one deepwater block).

DGH Response

“Response for gas expecting blocks are lukewarm because of lack of clarity on policy related issues,” said Director General of Hydrocarbons VK Sibal on the response and the bids. Exploration companies have taken a conservative approach and have bid cautiously, given the uncertainties in the tax regime, an analyst said.

“The bidding was low and the response was lukewarm,” a senior official from the director general of hydrocarbons said. While 12 blocks, out of a total of 57, failed to get even a single bid, as many as 19 got just one bid. As many as seven of the no-show blocks were in the deep water region. The response for the smaller fields, however, was relatively good.

Source : DGH, Media Reports, Industry

Rig Market in India

A boom in exploration in India has tripled rig usage over the past four years, adding to a global shortage and causing delays in tapping natural gas off the Indian east coast. Transocean, the world’s largest offshore drilling company, may raise rig prices further after India completes the biggest auction of offshore blocks.

• With crude oil prices galloping over $ 135/bbl, increased investments in exploration and production space globally has become inevitable.However, lack of availability of rigs will continue to keep the day rates firm.  

• Rents have tripled since 2005 for new rig contracts stretching up to 2012 as explorers seek to decrease the delay between discovery and development to take advantage of high oil prices.

 

Indian Market

Transocean, the world’s largest offshore drilling contractor with 82 units, made $296 million, or 10.2 percent, of total sales from India, according to its 2005 annual report. Revenue from India more than doubled since 2003, the fastest among Transocean’s main markets

Future Expetation

Reliance is paying $320,000 a day until August 2008 to rent the Deepwater Frontier rig, more than twice what the rig’s owner, Transocean, charged an earlier client, according to Transocean’s Web site. The rent is set to rise to $477,000 a day, if Reliance extends the contract in 2008 for another three years.

Riding on Market Boom :

Aban Offshore (Aban), with its 22 rigs (post acquisition of Sinvest) is well poised to leverage on the industry dynamics. Historically, Aban has clocked the highest operating margins in the industry at a global level.

Contract renewals for six of Aban’s assets (including Sinvest) are due over the next 10 months. With the current tightness in the rig market, the re-pricing of these contracts is expected to happen at significantly higher rates compared to their existing rates.

Essar Oilfields Services, a unit of Essar Shipping & Logistics, in Cyprus, paid $220 million for Transocean Wildcat, a 30-year-old offshore rig that can operate in depths of about 400 meters and capable of drilling up to 7,600 meters

 

Source : BS, Hearld, Transocean