Tough terrain

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SummaryThe tenth New Exploration Licensing Policy round is expected to kick off soon with mixed sentiments. Reform efforts like the gas price revision have been somewhat soured by the exit of global players such as BHP Billiton and Santos from the country

What is NELP?

The New Exploration Licensing Policy (NELP) was a major initiative launched by the government in 1998 to accelerate the speed of hydrocarbon exploration and production in India by opening up the upstream sector to private participation. It attempts to create a level-playing field between national oil companies (NOCs) and private players by ending the era of nomination blocks. Since 1999, the government has held nine NELP rounds with several NOCs and private companies participating in the process.

In the first round held in January 1999, 48 blocks were on offer and for the first time production sharing contracts were signed which govern the agreement between the government and the consortium. There is no signing bonus and costs are recoverable from actual production. NELP allows up to 100% participation by foreign companies and offers incentives like tax holidays to attract bids. The bids are technically evaluated by the Directorate General of Hydrocarbons according to a previously specified bid evaluation criterion. That apart, there exists a royalty regime.

How successful has NELP been?

Only three NELP blocks so far have seen any kind of commercial production so far. This is out of 254 blocks awarded to exploration companies in the nine rounds of NELP from which 128 discoveries have been made. An in-place reserve of about 745 million metric tonnes of oil equivalent has been accreted as on April 1, 2013, from these discoveries for which Declaration of Commerciality (DoC)/Field Development Plan (FDP) has been approved. Current oil and gas production from NELP blocks is about 6,938 barrels of oil per day and 14.14 million metric standard cubic metres per day, respectively, and the production is likely to increase in the future with the development of other discoveries. The first deepwater commercial oil production in the country commenced in September 2008 and the first deepwater gas production commenced in April 2009 from the block KG-DWN-98/3 (KG-D6) awarded to the consortium of RIL-NIKO under NELP-I bidding round.

What kind of investments have gone into NELP?

Investments to the tune of around $21.3 billion has been committed on blocks given out under NELP, with more money expected to be infused in blocks allocated in the fifth, sixth and seventh rounds. In the ninth round held in 2011, which saw very little global interest, ONGC won 10 of the 33 blocks that received bids. In the eight round, ONGC won more than half of the blocks offered. Despite

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