Evolution of Indian Oil and Gas Industry | Directorate General of Hydrocarbons (DGH)

 

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Evolution of Indian Oil and Gas Industry

 

The story of oil exploration in India began in the dense jungles and swamps and river-valleys of the north-eastern corner of the country. Lt. R. Wilcox, Major A. White, Capt. Francis Jenkins, Capt. P.S. Hanny, W. Griffith, W.Licut Bigge–they all saw at different times petroleum seepages from the banks of river Dihing. Mr. C.A Bruce (1828) and Mr. H.B. Medicott (1865) of the Geological survey of India also saw oil seepages while prospecting for coal in upper Assam.

 

Barely seven years after Edwin L. Drake drilled the world's first oil well in 1859 at Titusville, Pennsylvania, USA, in 1866, Mr. Goodenough of McKillop, Stewart and Company, Calcutta, drilled a hand-dug well of 102 feet at Nahorpung near Jaipur area of Upper Assam but failed to establish satisfactory production. In his second attempt on 26 March 1867, oil was struck at merely 118 feet (35.97-m) in Asia's first mechanically drilled well at Makum near Margherita area of Upper Assam. 

 

However, the first well dug at Digboi field in Assam in September 1889  and completed in November 1890 at depth of 662 feet by Assam Railways and Trading Company Limited (AR&T Co. Ltd.), registered at London, is regarded as the first commercially successful oil discovery (200 gallons per day). To add color to geologic reasoning legend was created that during the construction of a railway line by AR&T, in the year 1867, a herd of logging elephants returned to camp with their feet covered in oil after a night time excursion to find food and water. This led men to trail to the salt lick where seepages were prolific. Looking this, the elated English owner cried out to his men, “Dig boy, dig". Probably the name Digboi itself came from that word.

 

AR&T subsequently acquired a 77.7 square kilometer petroleum-rights concession in the Makum area of Assam, and by 1893 had drilled 10 wells at Digboi producing 757.08 liters/day. AR&T established Assam Oil Company (AOC) in 1899 with a capital of £310,000 to take over the petroleum interests of AR&T, including the Digboi and Makum concessions and set up a small refinery at Margharita (Upper Assam) with a capacity of 500 bopd to refine the Digboi-oil. Thereafter, systematic drilling began in 1891 and two years later in 1901, Asia's first oil refinery was set up in at Digboi. It is still functional and world's oldest operating refinery.

 

Failure to utilize geologic reasoning, promiscuous wild catting, misguided investment and nonchalance of the management towards technical support led to compounding of errors by AOC which made the company technically and financially impotent. Later on UK based Burma Oil Company (BOC) arrived in 1911 in Upper Assam (Surma Valley) and in 1915, after acquiring Oil interest from Budderpore Oil Co. Ltd (formed by a syndicate of Budderpore tea garden during 1911-13) began testing option in the Badarpur structure in the Surma valley (Upper Assam). Gradually by 1921, in a phase-wise manner, BOC acquired petroleum interests of AOC.

 

Torsion balance which was successfully adapted for geophysical surveys of oil was used at Bordubi (Assam) by a geophysical team in 1925. The Indian Co. "TATA engineering co." has also drilled several wells in Jagatia, Gujarat and produced small amount of gas in 1930s. In 1937, BOC jointly with British Petroleum (then Anglo iraniann Oil Co.) and Shell proposed to Govt. of India to carry out a geophysical survey of the important plain areas of India. The proposal was accepted and a new form of grant known as geophysical license was issued by Assam Government. In Assam, successful seismic survey was carried out in Naharkatia during 1937-39, triggering new enthusiasm in oil search and it became forerunner of discoveries in Assam basins and others also. The successful outcome of well NHK-1 in 1937 was vindication for geophysical method in oil exploration.

The world knew importance of oil and after Independence, Indian leaders realized its utility for rapid industrialization and security of nation. The company rule which were earlier framed to satiate the raw material need of British Empire was re-framed. While framing industrial policy 1948, the development of petroleum industry in the country was given top priority.

 

By 1948, GSI has started geophysical survey in Cambay area. The first oil discovery in independent India was made by AOC on 1953 in Nahorkatia and then in Moran in 1956 both in Upper Assam.  The oil industry, after independence, remained operated by foreign company for a considerable period. Burma Oil Company (BOC) kept its position as largest company in India till end of its operation.

 

In 1955-56 a delegation led by Mr. K.D.Malviya, Minister of Natural Resources, visited several European countries to study status of Oil industry in those countries and facilitate training of Indian professionals. Foreign experts also visited India to share their know-how. Erstwhile USSR helped to draw a detail plan for geological and geophysical survey and drilling plan in 2nd five year plan (1956-57 & 1960-61).

 

With the intention of intensifying and spreading exploration to various parts of the country a separate Oil and Natural Gas Directorate (ONGD) was set up in 1955, as a subordinate office under the then Ministry of natural Resources and Scientific Research. The department was constituted with a nucleus of geoscientists from Geological Survey of India.  But soon after its formation it was realized that the directorate cannot function efficiently with its limited financial and administrative liberty and in early 1956 its status was changed to a commission. In October 1959 the ONGC was made a statutory body by an act of parliament delegating it more power but it remained under Ministry. The job of ONGC was defined as "to plan promote, organize and implement programs for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other function as the central government may, from time to time, assign to it".

 

ONGC systematically started its geophysical surveys on area considered prospective on the basis of global analogy. Further, thrust was given for survey in area of Himalayan foothills and adjoining Ganga plains, alluvial tracts of Gujarat, upper Assam and basins of Bengal. The exploratory drilling carried out in Himalayan foothill during 1957, remained unsuccessful. Within a year of being formed, ONGC discovered oil at Cambay. The giant Ankleshwar field in the state of Gujarat in 1960, Kalol in 1961, Lakwa in 1964, Geleki in 1968 and Gas discovery-Manhar tibba in Rajasthan in 1969 were discovered subsequently.

 

Meanwhile, in 18th February 1959, for development and production of Nahorkatia and Moran prospects and to increase the pace of exploration in Assam, Oil India Private Limited was incorporated as a rupee company to take over BOCs affairs in Assam.  The company was owned 2/3rd by AOC/BOC and 1/3rd by Government of India and in 1961 they became equal partners by transforming OIL into a JV company. OIL discovered Kusijan oilfield in 1969 and Jorajan oilfield in 1972. Later, Eocene gas was discovered by OIL in Tengakhat field of Assam in 1973.

 

Offshore exploration was initiated by ONGC in the form of experimental seismic survey in 1962 in Gulf of Cambay and later in western offshore. Detailed seismic surveys in western offshore resulted in a discovery of large structure on Bombay-offshore in 1972-73 and drilling lead to India's biggest commercial discovery - Bombay High. Encouraged by this discovery, exploration was furthered in entire western off-shore including Kerala-Konkan basin and eastern offshore area. This led to large discovery of Bassein and Neelam in western offshore and PY-3 & Ravva in Eastern offshore. OIL also ventured from Assam to Orissa both in onshore and offshore. During 1979-89 it went to Andaman offshore and Rajasthan onshore. By the end of 80s ONGC and OIL has together drilled nearly 3100 wells totaling 4.9 million metres.

 

ONGC's geo scientific survey spread out to UP, Bihar, Tamil Nadu, Rajasthan, J & K, Kutch and Andhra Pradesh. By mid 1980s ONGC successfully discover prospects in Cauvery and KG basin. Kharsang oilfield was discovered by OIL in 1976 and in the same year ONGC discovered one of India’s biggest gas find of 283.17 BCM in the Bassein fields off Mumbai’s coast. Other gas fields discovered by ONGC were mid-Tapti, south Tapti and B-55. In 1978, OIL ventured out of Assam into Orissa offshore and onshore. OIL also venture into offshore Andamans in 1979-89 and onshore Rajasthan.

 

Till the end of 1970s, Indian E&P industry was dominated by the two National Oil Companies (NOCs) - ONGC and OIL to whom PELs were granted on nomination basis. Exploration was primarily confined to on land and shallow offshore. The strategic initiative was taken by government in 1979 to attract foreign investment, technology and capital to deal with future commitment and challenges of Indian oil economy by offering 32 exploration blocks (17 offshore & 15 onshore). Government started offering block systematically through bidding. These rounds are also known as Pre-NELP Exploration rounds. The three rounds during 1980-1986 was not very successful.

 

By 1981 Government took over OIL and it became full-fledged PSU. In 1982, ONGC made its biggest gas discovery in Gandhar, Cambay basin Gujarat and by 1986 KG basin were put in global map with several substantial discoveries made. By the end of 1986, 3rd round of international bidding for exploration block were offered. OIL and ONGC were offered 40% stake in JV if field was found viable. Few foreign companies participated but there was no committed exploration or breakthrough discovery. The foreshore terminal of IOC was commissioned in Madras (Chennai). However OIL and ONGC's effort continued in several parts of India and by 1989 OIL discovered gas in Tanot (Mata Temple) in Rajasthan and ONGC discovered south Heera in Mumbai offshore.

 

In 1990, 4th round of bidding invited and for the first time, Indian companies were allowed to participate with foreign companies. However no major discovery was made with these partnerships. In 1991, Government of India (GoI) adopted liberalized economic policy that led to de-licensing of core group including petroleum sector and partial dis-investment of government share including other measures. As a result, ONGC was re-organized as a Limited company (under the Company’s Act, 1956) from Oil and Natural Gas Commission to Oil and Natural Gas Corporation Limited. To give momentum to Petroleum sector in India, GoI came up with more lucrative offers in 1994.  However this also led to disagreement in Production Sharing Agreement. In couple of years, ONGC ventured into CBM in Damodar valley and explored EOR options in heavy oil belt of North Gujarat. By 1996, Government conducted 5 rounds of bidding and offered 126 blocks having area in the range of 1 square km to 50000 square km. Beside National Oil Companies and Indian Private Companies, some important companies like Shell, Enron, Amoco and Occidental participated in exploration and contracts were awarded to them.

 

The government efforts particularly during 1991-1996 gave required thrust for opening up Oil and Gas sector in India. After this, the process of opening the sector became more streamlined. Many private players also joined in development of this industry. Hindustan Oil Exploration Company (HOEC) which started its E & P venture in 1991, was among few such initial domestic private player.

 

In view of the liberalized policy adopted by GoI, a need for an independent upstream regulatory body called the Directorate General of Hydrocarbons (DGH) was envisaged to oversee and review the oilfield development programs so as to conform to sound reservoir engineering practices in line with national interests. Thus, DGH was formed vide GoI resolution dated 08.04.1993.

 

After the Nomination era till late 1970s, Pre-NELP Exploration era (1980-95) and Pre-NELP Field rounds (1993-94), Government of India formulated a policy called as New Exploration Licensing Policy in 1997.  The main objective was to attract significant risk capital from Indian and Foreign companies, state of art  technologies,  new geological  concepts  and best  management  practices  to  explore  oil  and gas  resources  in  the  country  to  meet  rising  demands  of  oil  and  gas.    This policy NELP was approved in 1997 and it became effective in February, 1999. Since then licenses for exploration are  being  awarded  only  through  a  competitive  bidding  system  and  National  Oil  Companies (NOCs)  are  required  to  compete  on  an  equal  footing  with  Indian  and  foreign  companies  to secure Petroleum Exploration Licenses (PELs). Nine rounds of bids have so far been concluded under NELP, in which production sharing contracts for 254 exploration blocks have been signed.   

 

With huge scope of activities and development in Oil and Gas sector in India, a lot of history in this sector is yet to be written.

Chronology of Major E&P Events in India
 

1889: W.L.Lake of Assam Railway and Trading Co. (AR & T Co) started Digboi Well No-1 Lake used to urge his men “Dig boy, dig” and hence the name “Digboi” The discovery of the ‘Digboi Oil field’ in Upper Assam was a landmark in the history of oil.

1899: AR&T Co formed a new company Assam Oil Company (AOC) and set up a small refinery at Margharita (Upper Assam) with a capacity of 500 bopd to refine the Digboi-oil.

1901: Digboi refinery commissioned.

1911: Burmah Oil Company (BOC) arrives on the Indian scene .

1921: Burmah Oil Company (BOC) takes over Assam Oil Company (AOC).

1925: India’s first attempt to use geophysics in its search for oil with a Torsion balance survey in the Bordubi area.

1937-39: Seismic surveys were initiated in and a major ‘High’ was located at Nahorkatiya in Assam The successful outcome of NHK-1 was a triumphant vindication of the geophysical methods of exploration.

Nahorkatiya triggered a new wave of enthusiasm in the search for oil in the country and became the forerunner of discoveries not only in Assam basin but also in other basins.

1948: Geological Survey of India (GSI) started geophysical surveys in Cambay area.

1956: Moran oil field discovered by AOC.August 14, 1956 Oil & Natural Gas Commission (ONGC) was established. October 15, 1959

ONGC becomes autonomous body, under an act of parliament.

1959: Oil India Private Ltd (OIL) incorporated and registered as a Rupee Company.

1960: Oil struck at Ankleswar in Gujarat and Rudrasagar in Assam.

1961: GOI and BOC become equal partners in OIL.

1962: The first public sector refinery comes up at Guwahati.

1963: World’s first crude oil conditioning plant commissioned at Nahorkatiya. India’s first deviated well NHK122 drilled by OIL.

1963: ONGC started offshore seismic surveys in Gulf of Cambay.

1968: Oil discovered in Geleki by ONGC.OIL commissioned the 1158 km oil pipeline to Guwahati and Barauni refineries.

1970: India’s first offshore well spudded in the Gulf of Cambay.

1974: Drillship Sagar Samrat strikes oil in Bombay High.

1974: Bombay High discovered.

1981: First well spudded in Godavari offshore.14 October 1981 OIL becomes a Government of India enterprise.

1983-84: Gas struck at Razole in Andhra Pradesh and Gotaru in Rajasthan.

1984: First Early Production system (EPS) commences in Gujarat .

1984: Gas was struck at Gotaru in Rajasthan by ONGC.

1984-85: Oil struck in kutch offshore, Godavari offshore and Changmaigam in Assam.

1986-87: ONGC strikes oil in the Tapti offshore area and Namti structure (Assam).

1988-89: Commercial gas finds in Rajasthan by OIL Nada field in Gujarat discovered .

1989-90: Western offshore production reaches a peak of 21.72 MMT.

1989-90: South Heera field discovered in Mumbai offshore.

1998: New Exploration Licensing Policy (NELP) launched and 48 Exploration blocks offered under round-I.

2000: Second round of New Exploration Licensing Policy launched and 25 Exploration blocks offered .

2001: One CBM block awarded on nomination basis.

2002: Third round of New Exploration Licensing Policy launched and 27 Exploration blocks offered.

2002: First round of CBM blocks bidding held and 5 blocks awarded.

2003: Fourth round of New Exploration Licensing Policy launched and 24 Exploration blocks offered.

2003: Two CBM blocks awarded on nomination basis.

2004: Second round of CBM blocks bidding held and 5 blocks awarded.

2005: Fifth round of New Exploration Licensing Policy launched and 20 Exploration blocks offered .

2006: Sixth round of New Exploration Licensing Policy launched and 55 Exploration blocks offered .

2006: Third round of CBM blocks bidding held and 10 blocks awarded.

2007: Seventh round of New Exploration Licensing Policy launched and 57 Exploration blocks offered .

2010: Fourth round of CBM blocks bidding held and 7 blocks awarded.

2010: Eighth round of New Exploration Licensing Policy launched and 32 Exploration blocks awarded.

2012: Ninth round of New Exploration Licensing Policy launched and 14 Exploration blocks awarded.

2016: Discovered Small Field Round Launched on May 25th , 2016