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UPDATE 2-Response muted at Indian oil and gas blocks auction
October 12, 2009 / 10:17 AM / 8 years ago

UPDATE 2-Response muted at Indian oil and gas blocks auction

* Gets 76 bids for 36 out of 70 oil and gas blocks offered

* Reliance Industries not among bidders for oil blocks

* Cairn gets 2 blocks, BG 1, BHP 3 and ONGC over a dozen

* Reliance lost bid for CBM block to Deep Industries

(Adds details, comments by oil secretary)

By Nidhi Verma and Pratish Narayanan

NEW DELHI, Oct 12 (Reuters) - India’s auction of oil and gas exploration blocks met a tepid response as the economic slump, valuations and a corporate battle over the sale of gas from Reliance Industries’ field deterred investors, officials and analysts said on Monday.

Among provisional winners were BHP Billiton (BLT.L) (BHP.AX), which won three shallow-water blocks in the Mumbai basin off India’s west coast, and Cairn India (CAIL.BO), a unit of Cairn Energy (CNE.L) which won a deepwater block in Mumbai Basin and a shallow water block in the east coast KG basin.

Nearly half of 70 blocks offered found no bidder, with 76 bids submitted for 36 exploration blocks, D.N. Narasimha Raju, joint secretary in the oil ministry, told reporters.

“Nobody will be happy with this response,” Director General for Hydrocarbons V.K. Sibal told reporters at the close of the latest auction round by Asia’s third-largest oil consumer, which imports 70 percent of its demand.

Indian auctions have seen scant interest by global oil majors in the past, but foreign firms such as Cairn Energy and local companies such as Reliance (RELI.BO) and state-run Oil and Natural Gas Corp (ONGC.BO) have been active in prior auctions.

“You might think the number is somewhat less but if you look at performance of bidding (globally) this year given the economic downturn, given the credit squeeze the market is facing, in fact such response is the best,” Oil Secretary R. S. Pandey said.

Single bids were received for 20 of the blocks, said Pandey, who expected final contracts would be signed in four months.

In the previous seven auction rounds, India awarded 203 oil and gas blocks. Last year, it got 181 bids for 45 blocks.

For a table on upstream oil and gas rounds, see [ID:nNEWROUNDS]

“In the current global economic scenario, even though oil prices are seen going up, oil companies are still very wary of investing in exploration blocks in India,” Deepak Pareek, an oil and gas analyst at Angel Broking, said. “They might find much better valuations elsewhere in the world and are not confident that blocks in India will yield good results.”

ONGC and partners were provisionally awarded stakes in 17 blocks. Of those, the Indian unit of BG BG.L will operate one deepwater block in the KG Basin, Oil India OILY.BO will operate two and ONGC will operate the remaining 14.

“PSUs (public sector undertakings) have to defend their market,” said Sibal.

RELIANCE DISPUTE

Reliance Industries did not bid in the auction, although the government had showcased its giant deep-sea gas field in the Krishna Godavari basin off India’s east coast, India’s biggest gas find, to draw investors to the exploration sector.

Reliance chairman Mukesh Ambani and his younger brother Anil have been locked in a dispute over the sale of natural gas from the field discovered before the business house was divided between the siblings. [ID:nBOM491383]

“Any fight is negative,” Sibal said, adding potential investors had been given wrong signals.

The government has sought to intervene in the case, saying the price of gas sold from the field would influence its share of the revenue from gas sales, but analysts sais potential investors would seek greater marketing freedom.

Anil Ambani said in a statement the Petroleum Ministry’s efforts to control the pricing and sale of gas was the reason for the poor response, and not the dispute.

India also got 26 bids for 8 blocks out of the 10 offered under the fourth round auction of coal bed methane blocks. Essar Group ESRO.BO has been provisionally awarded one block.

Sibal said Reliance Industries had lost it bid for one coal bed methane block to oil and gas services firm Deep Industries (DEIN.BO), which had provisionally won 7 coal bed methane blocks. (Editing by John Mair and Dan Lalor)

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