Hardy Oil to quit India if no development in assets is seen

Mumbai: Hardy Oil and Gas Plc of UK could become the latest casualty of delayed approvals, policy hurdles and production upsets in India’s energy sector.

The India-focused oil and gas company said on Thursday in a statement appended to its annual report that it will evaluate a “geographical shift in focus” by the end of the current financial year if it doesn’t see any progress on its three main assets in the country. Hardy Oil has one offshore block in the Saurashtra basin off the coast of Mumbai, and two in the Cauvery basin in the Bay of Bengal.

The company is present in India since 2000. Production at its sole producing block—PY-3 in the Cauvery basin—ended in 2011 after contracts for the block expired. Currently, Hardy has no production in India.

“Should the status-quo in India remain and tangible progress not be made in a reasonable timeframe, we will re-evaluate our current India focus. The board and management have the benefit of significant experience of other oil and gas provinces worldwide. The group remains in a strong financial position from which to either fund its planned work activity for the Indian asset portfolio or to implement a change of geographical focus,” Alasdair Locke, chairman of Hardy Oil said in the statement.

If Hardy Oil exits India, it will join the ranks of ExxonMobil Corp. of US, Petrobras SA of Brazil, ENI SpA. of Italy, Royal Dutch Shell of the Netherlands, Statoil ASA of Norway and Anglo-Australian miner BHP Billiton Ltd, which have either surrendered licences or abandoned joint ventures with Indian companies after winning blocks in the last nine rounds of auctions under the New Exploration Licensing Policy (NELP).

“We believe Hardy’s India-focused asset portfolio provides a good platform from which to create shareholder value. The outcome of planned activity through 2015 and 2016 is expected to endorse this view on the longer-term prospects of our portfolio,” said the company statement, adding for 2015-16, it has set targets to accelerate progress within its portfolio of Indian assets.

In case these targets are not achieved, it will consider shifting the company’s strategic geographical focus, it said.

Hardy Oil has three main assets in India—PY-3 and CY-OS/2 in the Cauvery basin and GS-01 in the Saurashtra basin. Its partners in these blocks are some of the biggest Indian companies such as Reliance Industries Ltd (RIL), Gail Ltd (Gail) and Oil and Natural Gas Corp. Ltd (ONGC).

Giving a status of its three assets in India, Hardy Oil said the company and its partners have submitted a new field development plan to restart production from the PY-3 block in the Cauvery basin by 2016 and are awaiting a go-ahead on the same. ONGC holds 40% interest in the block.

Work at its second block in the Cauvery basin—CY-OS/2—which is 25% held by Gail, has not started since the directorate general of hydrocarbons, India’s upstream regulator, disapproved a discovery in the block in 2007 due to expiry of its exploration period. The matter is in courts and the next hearing is in July.

On the third block—GS-01 off the Mumbai coast—Hardy Oil said it is in talks to acquire the participating interest from partner RIL.

In December 2014, Hardy Oil said the company, along with its partners RIL and British oil giant BP Plc, relinquished the D3 block in the Krishna-Godavari basin in the Bay of Bengal due to lack of approvals from the ministry of defence and uncertainty on long-term gas prices in India.

“There will be no major investments coming in the Indian oil and gas exploration unless the government eases the norms of approval, policy of cost recovery and ensures higher natural gas prices,” said an analyst with an international brokerage firm.

He did not wish to be named as he does not track Hardy Oil as a company. He said India as a destination for oil and gas production, comes at the bottom of the table of oil and gas companies globally.

“With lower prospects in India, it is only a very favourable regime that can make it attractive, or else, we will lose investments to countries as such as Mexico, Indonesia etc.,” the analyst said.