Pandemic delays work under new OALP blocks

Companies that have bid for developing new acreages of oil and gas under a revised policy regime in India will delay production on account of pandemic-related difficulties.

In most cases the pandemic and subsequent lockdowns have stalled the development of the fields awarded from 2018 onwards.

To date, the Centre has awarded 105 Open Acreage Licensing Policy (OALP) blocks under the revenue-sharing regime through five rounds of auction. The OALP bid rounds saw most blocks on offer being awarded to Vedanta, Oil and Natural Gas Corporation (ONGC), and Oil India Ltd (OIL).

Global major BP Plc and its partner Reliance Industries (RIL) had also emerged winner for one block.

All these companies have availed themselves of a relaxation in project implementation timelines, extended by the Centre, owing to the pandemic. According to the RIL Annual Report, the Centre has granted a 341-day extension of the initial exploration phase for the KG-UDW1 block, which was awarded to the RIL-BP joint venture under the second OALP licensing round.

RIL said the petroleum exploration licence (PEL) was issued in August 2019 and the 3D Seismic Acquisition campaign was being undertaken in the block.

Cairn Oil & Gas, part of Vedanta Ltd, currently has 51 OALP blocks in the country. These include the 41 blocks won under the first OALP round, and five each in the second and third rounds.

Vedanta also has two blocks awarded under the second discovered small field bid round.

“There has been a significant impact of Covid-19 on OALP blocks and completion of ongoing projects. We had sought an extension of the OALP exploration timeline, because the lockdowns have stopped exploration. Last year,

the Government provided up to 341 days of additional time until February 28, 2021. However, due to the second wave, further time extension will be required,” Cairn Oil & Gas told Business Standard in response to emailed queries.

This second extension is largely due to the ongoing second wave of the pandemic, which has led to restrictions on movements (both domestic and international). This is affecting work on the ground. “The situation with Covid-19 last year, especially in the recent second wave, has derailed the planned execution and further planning … The overall infrastructure in the country is also experiencing stress, which is further impacting operations adversely,” Vedanta said.

The extension allows companies time to execute a committed work programme (CWP).

ONGC got 24 blocks in the five rounds. It exited two because the Tamil Nadu government did not grant a PEL after the Neduvasal protests dampened sentiment for any fresh oil and gas exploration in the state.

The company invested $113.61 million (around ~850 crore) in the OALP blocks that have been awarded to it.

According to ONGC, exploration activities, like data acquisition in the offshore OALP blocks, were partially affected during the pandemic. But exploration in on-land blocks were affected because there was delay in crew mobilisation due to lockdown. The grant of PEL by state governments too was delayed due to the same reasons. Other activities, like processing and interpretation, were hampered due to lockdown restrictions.

Government-owned OIL had won 25 blocks, 12 in the north-eastern states, five each in Rajasthan and Odisha, two in the Andaman Islands, and one in the Kerala-konkan shallow offshore. It stayed one jump ahead of the other operators to start physical activity in an OALP block and was the first to complete seismic data acquisition in one of its acquisitions.

The pandemic seems to have taken away this lead. “Since seismic acquisition activities are limited by a fair weather window, statutory permission, clearances and access constraints, the planned acquisition activities in the blocks spilled over to the next field season, thus delaying the exploration campaign by almost a year,” an OIL official said.

The tendering of new contracts because of restricted mobility was also impacted, he added.