Energy company ExxonMobil eager on India chooses legal shield
Exxon has been studying Indian geological data and engaging with the government on policy reforms for a few years. It has an agreement with state-run Oil and Natural Gas Corp (ONGC) for joint exploration in the country.
“We are looking for the next Guyana,” said Dobson, referring to the company’s ambition to replicate in India the recent upstream success it has had in the South American nation. “The aim is to make a big discovery in India than investing in a producing field or developing an existing discovery.”
Dobson said Exxon possesses the right technology and the experience needed for the Indian conditions. “The type of geology we have seen here is the same as in Guyana,” he said.
India is competing with several countries for foreign investments in the upstream sector amid a larger global shift of capital spending from the oil and gas sector to renewables. Policy reforms of the past few years have proved insufficient to attract foreign investments to the Indian upstream, and a combination of rapidly rising domestic demand and falling crude production has pushed up the country’s dependence on imports to 87% of its consumption from 77% in 2015.
“India should offer globally competitive fiscals, enable those to stay intact, provide protection against expropriation, and neutral arbitration,” said Dobson. “The fiscal regime available to some of the exploration areas in the country is yet to become globally competitive,” said Dobson, adding that the global capital available for exploration is limited and that it “would go to a place around the globe that offers the best returns and protection to investments”.
Windfall taxes do not work in the long run, Dobson said, referring to the imposition of such taxes on oil companies in India and other places. “Such steps can shift investments away from a country over the long term,” he said. Exxon wants the exploration contracts to provide a legal shield against any move by the government to expropriate assets. “It’s really rooted in experience,” he said, citing the company’s experience in Venezuela where it faced expropriation after a change in government.
For dispute redressal, the company also wants the flexibility to pursue arbitration in any country mutually agreed upon rather than just in India. Exxon intends to remain a key LNG supplier to India and is currently engaged in talks with Indian buyers for long-term contracts. “Everybody is concerned about the price, the right slope,” Dobson said of the buyers’ concerns.
It’s been hard for Indian companies to source gas for a year as prices rose to record levels in the spot market and Russia’s Gazprom reneged on its long-term supply contract. “The Russia-Ukraine crisis is a reminder of having a reliable partner,” Dobson said.