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Wooing foreign investors India oil minister ready to ‘go down on my knees’ to attract new players; domestic energy consumption to grow by 12 percent a year over next 20 years Gary Park Petroleum News Calgary Correspondent
Niko Resources, a Canadian minnow with a large-sized appetite for adventure, keeps piling up successes in the Asian sub-continent where global majors have been reluctant to tread.
But the Calgary-based junior won’t have the field to itself for much longer if the Indian government is able to sell its message that the world’s largest democracy is on the brink of an energy boom to match the California gold rush of 1848.
The first foreign company to produce oil and gas in India, Niko, in partnership with Reliance Industries, India’s largest non-government energy firm, grabbed the spotlight in 2002 with a gas discovery off India’s east coast.
An independent engineering report by DeGolyer and MacNaughton has since assigned an original gas-in-place estimate to Block D6 of 11.3 trillion cubic feet; the operators believe the figure will be closer to 14.5 tcf.
Since then eight wells have all encountered gas and one is flowing at 23.7 million cubic feet per day, helping push Niko’s net volumes to 47 million cubic feet per day — a figure it aims to build this year to 130 million cubic feet per day.
But there is a snag.
Niko operates and has a 33.3 percent working interest in the 22-well Hazira gas field off the northwest coast of India, where it expects to net 75 million cubic feet per day in March.
However, the sooner it pays off its investment in Hazira the sooner the Indian government will reap greater benefits.
Under a sliding scale, as profits grow so does the government’s take, which already stands at 20 percent.
These fiscal terms and India’s record of coolness to foreign investment over many decades has kept the big players on the sidelines. India may be more welcoming That shows signs of changing, based on the message from India’s Oil Minister Mani Shankar Aiyar to 100 industry representatives in Calgary Feb. 3.
“We’re not only welcoming foreign investors, we’re actively pursuing them,” he said.
“If it weren’t for the remaining shreds of my self-respect I would go down on my knees and say, ‘Please, please come.’”
That light-hearted plea contained a strong thread of sincerity.
Aiyar conceded his country’s energy need is “desperate” as it braces for 8 percent annual economic growth over the next 20 years, putting India in the same league as China in its frantic scramble for oil and gas. Domestic output one-third of consumption Domestic output averages about 820,000 barrels per day, barely one-third of current consumption, and is expected to grow by 12 percent a year, especially gas for power generation, to keep pace with an economic explosion.
Believing his country has 225 billion barrels of oil equivalent waiting to be discovered, Aiyar noted that only 18 percent of 26 onshore oil and gas basins have been explored, while the deepwater prospects are largely untouched.
“We are not a hydrocarbon-poor country,” he said in late January before embarking on a global road show to pitch India’s fifth bidding round since 1999. “We are a hydrocarbon potential country, possibly a hydrocarbon-rich country.”
The previous auctions have resulted in 90 contracts, pledging combined work commitments of $4.4 billion, with only a smattering of interest from smaller foreign independents and nothing from ExxonMobil, BP or Royal Dutch/Shell, who are more focused on the deepwater areas of West Africa, Brazil and the U.S. Gulf Coast.
Hoping to turn that tide, Aiyar is also making stops in London, Houston, Dubai and Moscow before the May 31 deadline for bids. Niko sees India as good bet Niko Chairman, President and Chief Executive Officer Edward Sampson said India is doing “everything humanly possible” to build its energy supplies.
He rated India as a better bet for Western companies than Libya, where the government is taking 90 percent of production in some cases.
But Sampson cautioned that deals will become less generous as competition grows in India.
Mike Watt, exploration director at United Kingdom-based Cairn Energy, agreed that the Indian government “wants us to be successful because they have an energy problem.”
He told the Calgary audience there is much misinformation about India’s openness to foreign investment. “The state and national governments are supportive and they will fast-track projects,” he said.
Cairn has so far posted an oil find of about 1 billion barrels in Rajasthan province and a gas discovery in the Bay of Bengal close to Block D6.
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