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Exploration firms ease off

Oil and gas exploration firms, reeling under the pressure of low crude oil prices and squeezed profit margins, are unlikely to make any fresh investments in oil and gas exploration activities.

business Updated: Mar 04, 2009 20:47 IST
HT Correspondent

Oil and gas exploration firms, reeling under the pressure of low crude oil prices and squeezed profit margins, are unlikely to make any fresh investments in oil and gas exploration activities.

Confirming the trend, Atul Chandra, president, international operations, of Reliance Industries Ltd said on Wednesday that the next auction of oil and gas blocks by India under its 8th round of New Exploration Licensing Policy (NELP-VIII is unlikely to attract much investments from global players.

Such a statement coming from RIL’s fold assumes significance as the company itself has been investing heavily in the oil and gas exploration and production for several years, and has also made most of the oil and gas discoveries in areas auctioned since 1999.

The next round of New Exploration and Licensing Policy (NELP-VIII) is scheduled in the coming few weeks.

NELP-VIII is being held under the shadow of a global credit crunch and low oil prices as well as crisis of confidence in the policy regime offered by India.

"Previous NELP rounds saw people bidding like crazy. They treated exploration acreage like real estate," Atul Chandra said at a conference organised by Infraline Energy on the impact of global slowdown on India’s energy sector.

The previous seven biding rounds of NELP were dominated by state-owned explorers Oil & Natural Gas Corp (ONGC) and Oil India Ltd. Low crude oil prices have already seen the profits of ONGC and OIL shrink. besides low profit forecasts being by these companies for the next fiscal.

ONGC and OIL made enormous investment and exploration commitments to win the blocks. "Today they are finding it difficult to meet the commitments made," he said pointing out that low oil prices are not commensurate with the steep rise in oilfield service rates.

"The next NELP round is not going to be very attractive because of low prices," he said.