Why India’s new oil & gas exploration regime remains a challenge for foreign players 

The government called for a fresh round of bids for oil and gas exploration in the country with reforms to woo foreign players. However, they might yet stay away because of continued operational challenges in the sector.     

The Open Acreage Licensing Policy (OALP) bid round-XI for 21 blocks was announced last month amidst the ongoing energy crisis due to the war in West Asia. The Xth round, launched last year, has been extended to May 29, following lukewarm response from private players.

The government said that the extension was to offer “investors additional time to participate in one of India’s most significant upstream exploration and production opportunities.”

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This was despite the government’s assurance that the OALP-X provides a transparent, investor-friendly framework with key benefits such as a single licence for all hydrocarbons, no oil cess, 100% foreign participation, marketing and pricing freedom, reduced royalties, and early monetisation incentives.

Can these work, considering India’s failures in the past to attract capital in oil and gas exploration?

“This sector is among a few that have no government protection or incentive like PLI. To unlock India’s full potential, we need more exploration. Today, there are hardly 200 active licences in India when there should be 2,000,” says Vedanta Ltd Founder and Chairman Anil Agarwal, who has been a vocal critic of India’s mineral policies. Vedanta is a leading global producer of metals, critical minerals, oil & gas, power and technology.

Policy reforms over the years, from production sharing under NELP to revenue sharing under the 2017 Hydrocarbon Exploration Policy (HELP), have failed to attract foreign players.

Big overseas players such as British Petroleum, Shell, ENI, ExxonMobil, Petrobras and TotalEnergies have preferred to work with PSUs in brownfield re-development projects.

At present, international players account for less than 10% of India’s oil and gas production, according to CreditSights, a research firm. Their concerns include bureaucratic red tape, inconsistent enforcement across states and preference for domestic players.

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Kirit Parikh, an energy expert and former Member of the Planning Commission, says, “Policies have not been conducive to attracting foreign explorers, who are not fully trusting us because of a couple of incidents of retrospective policy changes.” He refers to 2013 retrospective tax on Cairn Energy seeking Rs 10,247 crore in taxes related to its 2006 corporate restructuring 

“It takes years to build trust and minutes to lose it. The kind of bureaucratic permissions and other clearances required are time-consuming,” Parikh tells BT. 

Market research firm Mordor Intelligence says forest clearances can extend beyond 900 days for upstream locations that intersect wildlife corridors. It says parallel land acquisition legislation mandates extensive community consultation, leading to compensation packages that can add 8–12% to project budgets.

“The long timelines deter foreign independents from frontier plays and skew capital towards brownfield re-development due to already existing statutory paperwork,” Mordor Intelligence says.