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Oil India and Indian Oil exit Gabon's Shakthi‑II block, ending decade‑old project
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Oil India and Indian Oil exit Gabon's Shakthi‑II block, ending decade‑old project

Oil India Ltd and Indian Oil Corp have handed back their 50‑50 partnership in Gabon's Shakthi‑II exploration block, terminating the production sharing contract after more than ten years of delays.

By SamacharDaily Editorial Team • • 2 min read

The two Indian energy majors formally relinquished their rights to the Shakthi‑II block in Gabon on Monday, effectively ending a production sharing contract (PSC) with the country's Directorate General of Hydrocarbons. The block, which was awarded to the partners in 2012 following a discovery that raised expectations of a sizable offshore oil field, has never moved beyond the exploratory phase. Over the past decade, the project suffered repeated setbacks, including logistical challenges, regulatory bottlenecks and a lack of sufficient investment to bring the field to commercial production. Both Oil India Ltd (OIL) and Indian Oil Corp (IOCL) held equal stakes in the venture, sharing both the risks and the potential rewards.

The decision to exit was taken after senior management reviews concluded that the continued financial outlay required to keep the project alive would not be justified given the uncertain timeline for first oil. Sources familiar with the companies' internal deliberations said that the partners had repeatedly sought to renegotiate terms with Gabonese authorities, but the negotiations stalled, leaving the PSC in a state of limbo. By formally surrendering the block, the companies will also forfeit any future entitlement to hydrocarbons from the area, though they will avoid further liability for operational costs and penalties.

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Gabon’s Directorate General of Hydrocarbons confirmed receipt of the relinquishment notice and announced that the block would be re‑offered to other interested investors through a fresh bidding round. The move is expected to free up OIL and IOCL’s capital for other strategic projects, including domestic upstream initiatives and the expansion of refining capacity back home in India.

Why This Matters

The exit underscores the challenges Indian oil firms face when venturing into overseas frontier basins, where political, fiscal and infrastructural uncertainties can erode project economics. For Oil India and Indian Oil, both of which are seeking to diversify their asset base beyond a heavily regulated domestic market, the decision reflects a pragmatic shift toward investments that promise quicker returns and lower risk exposure. On a broader scale, the relinquishment may affect Gabon's ambitions to attract foreign capital for its offshore resources; the government will need to re‑package the block to make it more appealing to new entrants. For India’s energy security strategy, the episode highlights the delicate balance between pursuing overseas supply sources and strengthening domestic production capabilities, a debate that is likely to shape future policy and corporate investment choices.

The re‑auction of the Shakthi‑II block could open the door for other international oil companies, potentially bringing fresh expertise and financing to Gabon's oil sector. Meanwhile, the capital freed by OIL and IOCL may be redirected toward India's ambitious plans to boost indigenous oil output and reduce reliance on imports, aligning with the government's broader energy self‑sufficiency goals.

Reporting based on verified dispatches from Economic Times. View primary release ↗
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