OPINION: India’s move to award more than 30 contracts for discovered oil and gas fields is a step in the right direction for the country’s sector, with expectations of a boost in offshore development activities after years of dwindling domestic production.

State-owned giants such as Oil & Natural Gas Corporation (ONGC) and Oil India Limited are facing a continuous decline in domestic output each year from maturing assets that form the majority of their portfolios.

The awards from the third Discovered Small Fields (DSF-3) round are relatively smaller finds that could not be monetised without market-driven government policies.

However, a liberal market-based pricing regime, as promised by Prime Minister Narendra Modi’s government, could speed up monetisation of dozens of offshore discoveries that have remained undeveloped for several years.

In addition, the development of these fields could potentially arrest — or at least slow — declining oil production for players such as ONGC and Oil India.

Development of the fields could also be a shot in the arm for work-starved engineering, procurement and construction companies, as dozens of new offshore platforms and several kilometres of subsea pipelines are likely to be offered by oil companies in the next few years.

India faces a massive trade deficit and a ballooning oil bill, as it imports more than 80% of its crude requirements.

Despite several attempts by the government to cut the nation’s oil import bill by 10%, India’s crude production is expected to continue its downwards trend in the absence of new discoveries and potential development.

The DSF-3 awards, with billions of dollars worth of investments, could eventually provide some respite to the government, where domestic oil and gas production is concerned.

(This is an Upstream opinion article.)

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