India’s petroleum and natural gas ministry is drawing up an ₹80,000-crore incentive package to attract foreign investment into deepwater oil and gas exploration, according to people familiar with the matter. The initiative, under the National Deepwater Exploration Mission, goes further than the series of upstream reforms over the past decade, which failed to attract significant investment from global oil firms, by directly funding part of exploration costs.
The proposal involves the government reimbursing up to 50% of the cost of drilling deepwater exploratory wells. Funding per well will be capped to prevent cost overruns. The government may also partly fund 3D seismic surveys, according to one of the persons, who did not wish to be identified. The support is aimed at reducing exploration risk and attracting global companies with deepwater expertise and advanced technologies.
High costs and India’s modest exploration success have long kept foreign firms away. Drilling a single deepwater well can cost Rs 1,000-1,200 crore, depending on geological complexity. An ultra-deepwater well can cost a few hundred crore more. The incentives will be available to both state-run and private explorers. ONGC on Saturday spudded its first deepwater exploratory well under the Samudra Manthan programme.
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India is also auctioning 18 deepwater and ultra-deepwater blocks under the Open Acreage Licensing Programme. The bid deadline has been extended to September 17, by when the government expects to finalise the incentive package. The proposal marks a significant departure from the existing exploration regime where companies with awarded blocks are required to complete a minimum work programme, including seismic surveys and exploratory wells, or face penalties.
Explorers sometimes choose not to drill after seismic data points to a low probability of a commercial discovery. Many surrender blocks rather than invest hundreds of crores in a high-risk well. Alongside the incentive scheme, the government has been improving the quality of geological data available to explorers. It has invested heavily in acquiring offshore 2D seismic data and is now looking to bring in private companies to reprocess legacy datasets using advanced technologies.
While the financial backing addresses the immediate cost barrier, the long-term viability of this strategy depends on whether the geological data actually supports commercial finds. The government’s recent push to acquire and reprocess seismic data aims to de-risk the basin for investors, yet the success of the 18 upcoming block auctions will be the true test of whether this subsidy model can reverse the decades-long trend of capital outflow from Indian exploration projects.
