Centre flags off NELP-X; auctions start next month

Written by fe Bureau | New Delhi | Updated: Jan 13 2014, 05:43am hrs
AuctionClose to 20 blocks are awaiting clearances from different ministries like defence and environment.
As many as 46 oil and gas blocks that have received all ministerial clearances will be put up for bidding in the 10th and likely the last round of the New Exploration Licensing Policy (NELP-X) auctions, a number that could probably up go up to 60 by the time the auctions kick off in February.

Close to 20 blocks are awaiting clearances from different ministries like defence and environment.

However, this is almost 50% less than the earlier number of 86 that the government had proposed in November.

NELP-X, which was launched by Prime Minister Manmohan Singh and oil minister M Veerappa Moily at the Petrotech 2014 conference, proposes to offer 166,053 sq km of acreage, six times more area than what was awarded in the ninth round. Addressing the gathering, the PM said that India needs to increase energy supply by three to four times over the next two decades as it is slated to become the third-largest energy consumer by 2020.

Pertinently, the blocks to be put on auction under NELP-X round include gas discovery area the government got back from Reliance Industries in the KG-D6 block and the 9,000 sq km area around the Rajasthan (Barmer) block that Cairn India had contractually relinquished but has since asked for, sensing potential recoverable reserves.

BHP Billiton's block in the Andamans will also be auctioned afresh.

Moily said that India might move to a revenue-sharing contract model from the current production-sharing contract system where operators are allowed to recover costs, but will take into consideration the views of the Kelkar committee which has recommended sticking to PSC.

Oil ministry officials argue that the revenue-sharing model is more transparent and requires less government intervention in routine exploration and development activities. On the other hand, some analysts are worried that operators might not invest in risky deep-water projects as they do not enjoy the benefit of cost recovery any more.

Under NELP, 360 exploration blocks have been offered so far and 254 blocks have been awarded. Currently, 148 blocks are active and 106 have been relinquished (see table).

This will also be the first time that a comprehensive uniform licensing policy (ULP) covering all forms of hydrocarbons has been implemented. Therefore, using the same licence, conventional oil and gas as well as shale and coal bed methane (CBM) can be explored in the same block.

Petroleum secretary Vivek Rae said that the oil ministry has sought from the government an extension in the tax holidays for ultra deep-water fields from the current 7 years to 10.

Rae added that this is possibly the last NELP auction the country is expected to see as India will move on to an open acreage licensing policy (OALP) regime in future. Under OALP, companies can bid for blocks anywhere in the country whenever they like. The oil ministry is already doing the groundwork in preparation for OALP as it plans to pass a speculative survey policy soon and also speed up the preparation of the national data repository (NDR) of geological data.

NELP 10 will see 17 onshore, 15 shallow-water and 14 deep-water blocks on auction.

Out of the 26 sedimentary basins in the country, blocks from 13 basins will be on offer including Gujarat, Mumbai, Cauvery, Andaman, Mahanadi and Krishna-Godavari. The Cambay Basin has the largest number of blocks on offer at nine. The Mumbai Basin, including blocks close to the prolific Mumbai High, has seven blocks on offer. Andaman will have five blocks, Rajasthan has four and Kerala-Konkan also four.

So far, 128 hydrocarbon discoveries (82 gas and 46 oil) have been made in 42 NELP blocks. In-place reserves of 745 million tonnes of oil equivalent has been accreted till April 1, 2013. The NELP bidding rounds have attracted 11 PSUs, 58 private Indian companies and 48 foreign companies.