NEW DELHI, March 31 - India's next exploration licencing round, expected in April, may get a poor response as government controls on sales of natural gas may put off potential investors, the head of Cairn India said on Tuesday.
The government has mandated how much gas should be sold and to which customers by Reliance Industries, which discovered natural gas in a deep-sea block it was awarded under India's New Exploration Licensing Policy.
Cairn India managing director and CEO Rahul Dhir said NELP had initially attracted investors with transparent and commercially attractive terms, which included freedom to market oil or gas and sell it at market prices.
"If you start to put constraints on that, what it does is it creates an additional degree of uncertainty which may deter investors," he told Reuters.
Companies that bid for exploration blocks in such an environment may not offer attractive terms to the government, he said.
"Putting these restrictions on pricing and gas marketing, all it's going to do is that it will eventually cost the government, either in terms of reduced profitability or reduced activity," he said.
Blocks auctioned in the previous round of India's exploration licensing policy did not attract top Western firms as they were deterred by tax issues and the quality of blocks on offer.
"The issue is that you have to be clear about what are the rules of the game. If there is uncertainty, people will factor that in," Dhir said.
India, Asia's third-largest oil consumer, imports 70 percent of the oil its consumes and is keen to quickly tap any remaining domestic reservoirs to help offset its growing dependence on imports.
While state exploration firm Oil and Natural Gas Corp has not reported a big discovery for years, private firms such as Reliance and Cairn have reported impressive finds.
Cairn is expected to start producing crude oil from its fields in India's desert state of Rajasthan this year.
The government has mandated how much gas should be sold and to which customers by Reliance Industries, which discovered natural gas in a deep-sea block it was awarded under India's New Exploration Licensing Policy.
Cairn India managing director and CEO Rahul Dhir said NELP had initially attracted investors with transparent and commercially attractive terms, which included freedom to market oil or gas and sell it at market prices.
"If you start to put constraints on that, what it does is it creates an additional degree of uncertainty which may deter investors," he told Reuters.
Companies that bid for exploration blocks in such an environment may not offer attractive terms to the government, he said.
"Putting these restrictions on pricing and gas marketing, all it's going to do is that it will eventually cost the government, either in terms of reduced profitability or reduced activity," he said.
Blocks auctioned in the previous round of India's exploration licensing policy did not attract top Western firms as they were deterred by tax issues and the quality of blocks on offer.
"The issue is that you have to be clear about what are the rules of the game. If there is uncertainty, people will factor that in," Dhir said.
India, Asia's third-largest oil consumer, imports 70 percent of the oil its consumes and is keen to quickly tap any remaining domestic reservoirs to help offset its growing dependence on imports.
While state exploration firm Oil and Natural Gas Corp has not reported a big discovery for years, private firms such as Reliance and Cairn have reported impressive finds.
Cairn is expected to start producing crude oil from its fields in India's desert state of Rajasthan this year.
