Syllabus
GS 3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Context:
The recent discovery of oil and gas reserves in the Andaman and Nicobar Basin has reignited discussions about India’s energy security.
More on the News
- Union Petroleum and Natural Gas Minister Hardeep Puri said that India has the potential of “several Guyanas” in the Andaman region.
- He also highlighted that the government has taken several steps to boost oil and gas exploration and production in the Andaman region.
Significance of Andaman and Nicobar for Oil Exploration
- India’s Energy Dependence and Potential Impact: India imports 80% of its oil and 50% of its natural gas. A discovery of 5 billion barrels of oil could significantly improve the country’s energy security.
- Strategic Location: The Andaman and Nicobar region is close to areas known for oil and gas, making it a promising place for new discoveries.
- Government Support: The Ministry of Petroleum and Natural Gas recently included the Andaman region in its April 2025 oil and gas block auction, showing its push to explore this area.
- High Potential for Oil and Gas: Experts believe the region has great chances of finding large amounts of oil and natural gas.
- Untapped Global Frontier: The Andaman region is seen as one of the few remaining places in the world that haven’t been fully explored for oil and gas, making it important for global energy exploration.
From Control to Facilitation: A Policy Reset
HELP was introduced in 2016 and gave a strong push to investment and exploration in the basin.
Two important features of HELP were:
- Bidding through the Open Acreages Licensing Policy (OALP)
- A shift from production-sharing to revenue-sharing regime.
HELP also introduced a uniform licensing framework for all types of hydrocarbon exploration and production.
OALP allows investors to study and bid for any block of their choice using data from the National Data Repository.
The combination of OALP and revenue-sharing attracted foreign investment and collaboration.
In 2023, ONGC finalised a partnership with Total Energies, a French company, to explore deep-water blocks in the Mahanadi and Andaman offshore.
Earlier, in FY 2013–14, ONGC had drilled six wells off the Andaman shores but found no commercial success or production.
In 2020, Oil India also conducted surveys, including shallow waters in addition to the deep waters ONGC had explored earlier.
Eight rounds of OALP bidding have awarded 144 exploration blocks, with a total expected investment of $3.37 billion.
The ninth round offered 28 blocks covering more than 1.37 lakh sq. km.
The tenth round, announced in April, will offer 25 blocks across 13 sedimentary basins, covering 1.92 lakh sq. km.
Oil India and ONGC have secured two basins each in the region in the first eight rounds.
Four more basins, all in the Eastern Andaman region, will be put up for bidding in the tenth round.
Key factors determining the shift in Policy
- High Cost of Offshore Exploration: Exploration and production in offshore regions like Andaman Nicobar are costlier than onshore activities due to complex underwater infrastructure and operations.
- Long Gestation Period: Even after discovering a basin, it takes several years to move from exploration to commercial production, delaying economic benefits.
- Price Fluctuations Affect Viability: Strong Ocean currents and global oil price fluctuations can negatively impact the long-term commercial viability of offshore projects.
- Cost vs Profit Dynamics: Offshore sites are expensive to build but as per Rystad Energy, once operational, they can remain profitable even at relatively lower oil prices.
- Dependence on High Oil Prices: Sustained investment by upstream companies depends on high oil prices which act as an incentive for continued exploration and production.
Mains Question
How do global oil price fluctuations and high offshore costs affect India’s hydrocarbon ambitions in the Andaman-Nicobar region? Analyse in the context of energy security and economic feasibility. (15M, 250W)