India attracted $36 billion investment, 177 discoveries in pre-2014 oil, gas blocks: Oil Ministry Report

India’s focus on oil and gas sector has pulled in over $36 billion in investment and yielded 177 hydrocarbon discoveries, according to a new report from the Petroleum Ministry. At the heart of this investment surge was the New Exploration Licensing Policy (NELP), which offered bidders full cost recovery before profit sharing — an approach that reshaped India’s upstream energy sector before it was overhauled in 2016, as per the report.

 

In 2016, the cost-recovery-based NELP model was scrapped in favour of a revenue-sharing contract (RSC) system. Under this new framework, blocks are awarded to companies pledging the highest share of production to the government, regardless of their exploration and development expenses.

Between 1999 and 2010, the nine NELP bid rounds awarded 254 blocks, attracting $17.6 billion in exploration investment, PTI reported. This led to 67 oil discoveries and 110 gas finds. An additional $18.64 billion was invested to develop some of those fields.

In comparison, the eight rounds under the Open Acreage Licensing Policy (OALP) from 2018 to 2022 awarded 144 blocks, resulting in only 6 oil and 4 gas discoveries, with a total exploration investment of $1.37 billion.

NELP blocks were responsible for some of India's most significant finds. Reliance Industries (RIL) and BP Plc’s eastern offshore KG-D6 block, which currently contributes a third of India’s natural gas output, and ONGC’s KG-DWN-98/2 (KG-D5) block were both awarded under this regime, PTI report added.

According to the interim report by the Joint Working Group on Ease of Doing Business in the upstream sector, NELP was instrumental in expanding exploration acreage and drawing foreign and private capital into India's E&P space. “Major international companies such as British Gas, Cairn Energy, Eni, BHP Billiton, and BP participated in the NELP bidding rounds, bringing advanced exploration technologies and capital into India's upstream industry.”

However, NELP was not without issues. “One of the major issues was the delays in obtaining clearances, including environmental and regulatory approvals, which often resulted in significant project delays,” the report noted. Disputes over cost recovery further complicated operations, with divergent interpretations of contracts leading to standoffs between companies and the government.

To address these hurdles, the government launched HELP (Hydrocarbon Exploration and Licensing Policy) in 2016. It replaced the complex PSC model with a streamlined RSC approach, simplified licensing, and granted operators more autonomy. 

“This marked a transformational shift in India's E&P regime, with a stronger focus on reducing operational complexities, increasing transparency, and providing greater autonomy to operators,” the report said.

The shift to RSCs was designed to eliminate disputes over cost recovery. Under this model, the government and operators share revenue based on pre-agreed terms, irrespective of how much the contractor spends during exploration and production.

Since 2018, eight OALP bidding rounds have been conducted under the RSC regime. Last week, contracts were signed for 28 blocks awarded in the OALP-IX round. A 10th round is currently open for bidding.