At Independence, India's domestic oil production was just 250,000 tones per annum. The entire production was from one state-Assam. Most foreign experts had written off India as far as discovery of new petroleum reserves was concerned. The Government announced, under Industrial Policy Resolution, 1954, that petroleum would be the core sector industry. Preamble
Petroleum exploration & production was controlled by the Government-owned National Oil Companies (NOCs), ONGC and OIL, in pursuance of the Industrial Policy Resolution, 1954. In the early 70s, they supplied nearly 70% of the domestic requirement. However, by the end of the 80s, they had reached the stage of diminishing returns. Oil production had begun to decline whereas there was a steady increase in consumption and today the two NOCs are able to meet only about 35% of the domestic requirement. This was further compounded by the resource crunch in the beginning of the 90s. The Government had no money (FE) to give to the NOCs for the development of some of the then newly discovered fields. While some of these fields could be developed by ONGC (Gandhar, Neelam, Bombay High, Lakwa, Heera, Geleki etc.), for others there was no money available for indigenously developing the fields. The problem had elements such as the administered oil price, non-availability of appropriate technology, logistics etc.
Petroleum Sector Reforms, 1990
The Government launched the Petroleum Sector Reforms (PSR) in 1990. Till then, three rounds of exploration bidding had been gone through with no success in finding new oil/gas deposits by the foreign companies who only were allowed to bid. Under the PSR, the Fourth, Fifth, Sixth, Seventh and Eighth Rounds of exploration bidding were announced between 1991 and 1994. For the first time Indian companies with or without previous experience in E&P activities were permitted to bid starting with the Fourth Round. The Government then announced the Joint Venture Exploration Program in 1995. The exploration blocks were in those areas for which the Petroleum Exploration License was with the NOCs and they were required to have a 25% to 40% Participating Interest from day one. Foreign Companies in Exploration in India
Foreign companies entered the Indian E&P scene since early fifties (Indo Stanvac Project- A Joint Venture between Government of India and Standard Vacuum oil Company for West Bengal onland in early fifties, Carlsbons Natomas for Bengal offshore in early seventies, Assamerc for Cauvery offshore and Reading and bates for Kutch offshore also in early seventies and later since the first round in 1980; Shell for Kerala offshore and Chevronn- Texaco in Krishna - Godavery Offshore). This was certainly not as much as elsewhere in the world. Indian E&P Companies
Most of the Indian companies barring HOEC have been riding piggyback on the foreign companies for exploration and development ventures in India. In this regard, Reliance Petroleum Ltd. has taken the first step by joining up with ONGC in bidding for exploration as well as development ventures in India and abroad. Some of the downstream companies like IOC, GAIL has entered also upstream in consort with ONGC and OIL. Opening of the Oil/Gas Fields for Development by Private Companies The Indian oil/gas fields discovered by the two NOCs, were first offered in 1992 under the First Offer. The second such offer was made in 1993. Development of fields is characterized by a comparative lack of business risk but is a cost intensive venture. Only those companies who have previous experience of field development can undertake such ventures. Unlike the Exploration blocks, field development contracts have upfront payments to be made to the NOCs for past costs as well as in the form of signature bonus. At the stage of oil/gas production, companies are also required to make production...