By R. Sasankan

India seems to have gone into a tizzy after Pakistan recently reported a major oil and gas find in its territorial waters that could give it the bragging rights to claim ownership of the world's fourth largest oil and gas reserves.

The report has galvanized the Government of India and the national oil companies (NOCs) to announce an aggressive exploration and production (E&P) programme in the country that will be packed with sufficient incentives to disarm the reservations of global oil giants that have generally refrained from acquiring oil and gas fields in the country.

Pakistan's major oil discovery is the consequence of prolonged exploration efforts and the lessons learnt from a long list of failures in the past. But it is still not certain that the global oil giants will flock to that country. Pakistan's petroleum minister, Musadik Malik, admitted that international oil companies (IOCs) were still reluctant to take up E&P work in Pakistan because of perceived threats and the high costs to ensure security of assets and personnel. Many believe that this will brighten India's chances of luring these players to India where these threats have never been experienced or foreseen.

Coincidentally, S&P Global recently revealed that India could hold up to 22 billion barrels of oil and gas in just four of the largely unexplored basins: Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan. This is in addition to the potential that already exists in not only the new acreages in the producing basins but also in other frontier basins. It is against that backdrop that the Indian Petroleum Minister, Hardeep Puri, has announced investment opportunities for E&P work in India worth $ 100 billion.

It is worth remembering at this stage that the few new discoveries made by ONGC in the recent past have been confined to Bengal onshore, Mahanadi offshore, and the Vindhyas in Madhya Pradesh. We are not very sure why these new discoveries were not pursued with the vigour and urgency that they deserved. The tardiness could possibly have stemmed from a general loss of focus in E&P efforts.

The recent oil find in Pakistan should encourage ONGC, and to some extent Oil India Ltd (OIL), to introspect about their lapses and review all facets of the past exploration efforts not only in the frontier basins but also in the producing basins to identify the elusive reserves, particularly in the older sedimentary rocks of India. We have been able to accumulate merely 10% of the discovered reserves in this country as against the global average of nearly 80% of reserves in the older sediments - and that is a deficiency that we need to ponder upon.

We also need to confront a stark reality. If we cast an eye on the past bidding rounds for oil exploration blocks, we will be forced to acknowledge an uncomfortable truth: national oil companies (NOCs) have dominated E&P work in India. In fact, unconfirmed reports suggest that NOCs were actually browbeaten by the government on several occasions to bid for a large number of blocks against their will just to satisfy bureaucratic desire to certify the success of the bidding rounds.

In the backdrop of the new developments, it is nevertheless necessary to ensure that the NOCs continue to play the pioneering role in opening up the frontier basins. The IOCs and the private operators will set foot in these basins only when they see some promising signs from the efforts of the NOCs.

The application of state-of-the-art technologies in the entire value chain of E&P work - from G&G data acquisition to fit-for-purpose hi-tech drilling and completion of wells, supported by cost-effective logistics and technological services - will be the key to achieving success in the geologically-complex and logistically-challenging terrains of these basins.

But the recent actions of the government indicate a contradictory stance. For example, instead of enhancing the capabilities, the board of ONGC today does not include a Director(Drilling). E&P has always been a major cost centre with because of ever-changing technology input requirements. Therefore, a dilution of the focus on what many consider the core responsibility of ONGC diminishes the worth of this function and, by extension, the raison d'etre of the organization itself.

At the same time, a new position of Director (Business development and strategy) has been created, probably to justify the reduced focus on E&P activity, which has been the bread- and-butter activity of the company. This sends out the message that ONGC will continue to diversify and move away from its core activity. Surely the position of Director (BD & Strategy) should never have usurped the position of Director (Drilling). If necessary, a new position as Director (BD & Strategy) could have been created even though many will question its rationale.

It is important to assert that NOCs in India should not be permitted to digress from their core E&P work until all the basins in the country are reasonably explored. As long as they remain as upstream NOCs, there can be no compromise on this issue.

The reasons are simple: even in the last bidding round (OALP-IX), ONGC (on its own and in alliance with others) emerged as the largest bidder with bids for 19 out of the 28 blocks on offer. Therefore, it is necessary to ensure that they divest their downstream assets to the downstream NOCs. Instead, they should be encouraged to concentrate only on E&P work and other related businesses like CBM, Underground coal gasification, geothermal energy from subsurface, E&P of natural (white) hydrogen, wind energy in deep offshore etc. both within India and outside.

The need for them to diversify into the downstream arena can be re-examined only after the Indian frontier basins have been reasonably explored. The composition of the Board of ONGC should also be restructured immediately, taking into account the challenges arising from state-of-the art conduct of E&P and related operations in the future.