India streamlines approvals for upstream oil projects

India's Directorate General of Hydrocarbons (DGH) has reduced the number of approvals required for exploration projects in an attempt to make it easier to develop the country's upstream.

The DGH, part of the oil ministry, has cut the number of steps needed to comply with contract awards to 18 from 37 previously.

The policy overhaul is designed to simplify and standardise procedures for developing blocks awarded under or before the New Exploration Licensing Policy (Nelp), India's long-running exploration policy that was in place until 2016.

"One of the issues plaguing the upstream sector was the anaemic pace of approvals and decision making," ratings agency ICRA's vice-president and co-head of corporate ratings Prashant Vasisht said. "Now with the number of approvals being reduced, the time for exploration and development of oil and gas blocks will be reduced."

This could cut the time needed to monetise discoveries and reduce compliance costs, boosting internal rates of return and potentially leading to an increase in production, he said.

India's domestic oil and gas output has been falling for several years, leaving the country reliant on imports for 80pc of its crude needs. Indian crude production was 576,000 b/d in May, lower by 6pc from a year earlier and down by 13pc compared with the same month in 2019.

The recent reforms "are likely to encourage exploration, especially in the Category-II and Category-III basins where higher weightage is being given to exploratory wells and revenue is only being shared in case of a windfall gain," said Ranjan Saxena, upstream analyst at Rystad Energy.

India's Category-II basins have contingent resources pending commercial production, while Category-III basins have prospective resources awaiting discovery.

The reduction in the number of processes "will reduce project planning times and will invite more domestic and foreign direct investment in the exploration and production sector. This may bring in more players like ExxonMobil, which is known to have shown interest previously," Saxena said.

By Sathya Narayanan