India Road Tests Its E&P Growth Plan

Abstract

Mike Watts is the cofounder of Magna Energy, an exploration and production (E&P) startup with no operations and a contrarian business strategy targeting Indian oil and gas. At a recent presentation in Houston promoting India’s upcoming bid round of small field discoveries, Watts, who led Cairn Energy’s exploration program when it made big deals and discoveries in India, played up the country’s unrealized oil and gas potential. “You need to be passionate and believe in the geology of India,” Watts told the 150 people who attended the road show publicizing the bid round. Based on his experience dating back to the 1980s, he believes India “is vastly unexplored compared to the potential.” His vision has the backing of Carlyle Group, a private investment bank, which committed up to USD 500 million to support Magna’s program to build production and reserves in India. The upbeat mood of the road show contrasted with the dark mood of the current global oil business. India is “a big growing market which is a bright spot in an unsettled world economy,” said Dharmendra Pradhan, India’s minister of Petroleum and Natural Gas. The sale is an early test of Indian Prime Minister Narendra Modi’s program to expand domestic oil and gas production, which has included sweeping regulatory changes in the world’s third-largest energy-consuming country. If the country is unable to increase its flat oil production trend line, the International Energy Agency predicts that India will be importing 90% of its oil by 2040 to meet its needs. “India has a dependence on imported oil and gas, and a clear policy has been set in place to relieve this dependency and that presents tremendous opportunities in the E&P sector,” said Atanu Chakraborty, director general of the Directorate General of Hydrocarbons, which is running the auction of properties relinquished by the state-owned Oil and National Gas Corp. (ONGC). Mixed Emotions Consultants in India agree there is reason to be upbeat about India’s future, but they are feeling the global oil slump. “The last 18 months have been very hard,” said Ashish Chitale, who runs Praesagus RTPO, the Indian partner for the consulting firm Sierra-Hamilton. “All the excitement is potential excitement.”