Hydrocarbon Vision 2030 (ஹைட்ரோகார்பன் தொலைநோக்கு ஆவணம் 2030)

5.1.4.4.8 Analysis of life cycle cost in NER vs other parts of India
As has been described in the above sections of the report, exploration, development and production
activities in the northeastern region pose a challenge to the developer, which escalates the overall
cost of production. This escalation of cost discourages further investment in the region, thereby
limiting exploration activity. Therefore, in order to improve the overall investment sentiment in oil and
natural gas exploration activities in the region, a pertinent incentive mechanism needs to be
incorporated. We have carried out our analysis based on data provided by DGH which is depicted in
the table below.
Table 49: Key assumptions for cost comparison
Description Average cost in Cost in a block in % higher/ (lower)
NER blocks ($/mmboe) Cauvery basin
Unit exploration capital 7.60 1.70 348%
Unit developmental 4.92 3.57 38%
capital cost
Unit production costs 3.37 9.12 -63%
Unit life cycle costs 15.88 14.39 10%
Source: DGH
As can be observed from the table above, the overall cost of production i.e. the life cycle cost is 10%
higher for blocks in NER than in the rest of the country. Based on our analysis, an appropriate
premium may be given on production of natural gas from the region. Crude oil prices are already
linked to international market prices; hence, there is no need to offer incentives on oil production.
5.1.4.5 Service providers
Service providers are the backbone of any industry that is capital intensive in nature. The typical
spends of E&P operators on outsourced work to service providers is more than 60% of their total E&P
costs, which highlights the significance of service providers. The E&P service providers have played a
key role in the success of E&P operators worldwide. India too relies heavily on the oilfield service
providers. This reliance is expected to continue in the future if the country targets to explore and
produce hydrocarbon resources from its vast sedimentary areas of 3.14 million square km.
Although significant oil and gas potential exists in the northeast region, exploration and development
have been stalled by various issues. The presences of service providers are also limited in the
northeast region due to issues such as law and order problems, inadequate connectivity
infrastructure, lower business potential etc. The service providers who are present in the region
provide limited service offerings instead of their entire service portfolio they offer elsewhere in India
due to economic viability and other issues. Further, NOCs operating in the region have developed
significant in-house service capacities to cope up with the challenges posed by such unavailability of
reputed service providers. However, small players as well as other private E&P operators are facing
the full brunt of such unavailability, as they could neither develop in-house services in a short span of
time nor could they hire reputed service providers due to financial constraints. Moreover, local service
providers are not technologically and financially sound enough to fulfill the requirements of E&P
operators. Therefore, the E&P activities in northeast India are constantly being confronted by the
unavailability of service providers.
Oilfield services cover a wide range of activities, which originate from exploration and continue at
every stage till the final delivery of crude to refineries. E&P companies utilise specialised services and
latest technology offerings of service providers to reduce the underground risks, thereby improving
chances of success in E&P operations. The current oil and gas services market in India is dominated
by foreign players such as Transocean, Schlumberger, Halliburton, Baker Hughes, Weatherford etc.
The majority of the consumables and equipment or tools required in the different E&P activities are
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