In a significant development, Oil India Limited (OIL), a state-run entity, is poised to embark on drilling operations in the Andaman Islands at the outset of the forthcoming fiscal year, 2024-25. The company has efficiently identified the requisite drilling rigs for this endeavor, as confirmed by Manas Kumar Sharma, the Director of Exploration and Development at OIL. This initiative is rooted in the two shallow-water blocks, AN-OSHP-2018/1 and AN-OSHP-2018/2, which Oil India secured during the third round of the open acreage licensing policy (OALP).
The Directorate General of Hydrocarbons (DGH) designates Andamans as a ‘Category II’ basin, signifying the presence of sub-commercial discoveries yet to be transformed into recoverable reserves. Notably, Category II basins hold contingent resources with the potential for conversion into recoverable reserves.
The Indian government’s decision to open up previously restricted exploration areas is a strategic move aimed at bolstering domestic crude oil and natural gas production. The Andaman basins, covering a sprawling 225,918 square kilometers, encompass 18,074 square kilometers of shallow-water zones and 207,844 square kilometers of deepwater areas, which are believed to conceal substantial hydrocarbon reserves.
Oil and Natural Gas Corporation (ONGC) and Oil India Limited were entrusted with surveying the exclusive economic zone (EEZ), spanning over 22,000 line kilometers of two-dimensional (2D) data in the region. The comprehensive survey, involving acquisition, processing, and interpretation of 22,500 line kilometers of 2D broadband seismic data in the Andaman-Nicobar basin, was submitted by OIL to DGH on March 31, 2023. ONGC, in collaboration with DGH, has similarly completed the survey of the EEZ.
In the fiscal year 2022-23, Oil India’s crude oil production amounted to 3.176 million metric tonnes (MMT). During the first quarter of the current financial year (2024), the company’s production remained steady at 0.820 MMT, compared to 0.779 MMT in the corresponding period of the previous year.
The forthcoming ninth round of the open acreage licensing policy (IX OALP) launched in October 2022 introduces four blocks in the Andamans for exploration. Bidding for these blocks is yet to commence.
The IX OALP round encompasses 26 blocks in total, with 15 in ultra-deep water, eight in shallow seas, and three located on land, covering an extensive area exceeding 223,000 square kilometers. Officials from ONGC and OIL have expressed a keen interest in bidding for additional blocks in the Andamans.
India’s high dependency on crude oil imports, which account for over 85% of its requirements, has driven the government to actively promote exploration activities to bolster domestic production. It has also enticed foreign entities to invest in the Indian oil and gas sector. Nevertheless, experts recognize that exploration projects are long-gestation, and the country will continue to rely on imports until the fruits of these endeavors become evident.
Anish De, Global Head of Energy, Natural Resources, and Chemicals at KPMG International, noted that exploration activities often take years to mature and deliver results, while India’s fuel consumption continues to rise. As of the current financial year up to August 2023, India depended on crude oil imports to fulfill 87.8% of its total requirements.
De further emphasized that the prospectivity of areas in India, denoting the likelihood of discovering oil or gas, is generally perceived as less favorable compared to other regions. This perception leads companies to prefer investments in regions with higher prospectivity, posing a challenge for exploration activities in India.
