9 Apr : India launched its biggest-ever auction of oil and gas exploration blocks on Thursday, offering 70 areas for bidding."We are offering 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks for bidding in the eighth edition of New Exploration Licensing Policy (NELP)," Petroleum Secretary R S Pandey told reporters in New Delhi.
Alongside NELP-VIII, the Government also offered for bidding 10 areas for extraction of gas, known as coal bed methane (CBM), from below coal fields. Bidding for CBM-IV and NELP-VIII rounds will close on 10th August, he said.
India had offered 57 blocks in NELP-VII last year and awarded 44 to companies like BHP Billiton and Oil and Natural Gas Corp (ONGC). In the first six rounds, 162 areas with an investment commitment of USD 8.33 billion were awarded.
"Reliance (Industries) beginning production from its Krishna Godavari basin KG-D6 block will bring in more investors," Pandey said.The company was awarded KG-D6 block in the first round of NELP in 1999 and it began gas production last week. Eighty million cubic meters per day of peak output from KG-D6, expected in a year’s time, will double gas production of Asia’s third largest energy consumer.
Of the total committed investment of USD 8.33 billion received in the first six rounds of NELP, USD 3.887 billion had already been spent by oil and gas companies till March 2007.
Of the USD 8.33 billion promised investment, the largest commitment of USD 3.32 billion was received in NELP-VI where 52 of 55 blocks on offer were grabbed.
Under the NELP blocks offered so far, 49 oil and gas discoveries have already been made in Cambay onland, North East Coast and Krishna Godavari deep-water areas, asserting over 600 million tonnes of reserves.
However, there are tax and policy issues, which are still not addressed and may force poor response in NELP-VIII. The government has withdrawn a seven-year income tax holiday on natural gas production, while the same for crude oil project has been retained.
Also, the pricing and marketing freedom guaranteed in NELP have been compromised upon as evident in case of RIL’s KG-D6 discoveries where the government first took it upon itself to fix the rates of natural gas and then dictated individual customers, who the fuel has to be sold to.
Pandey said NELP-VIII would be completed in four months and a follow-on offer of more blocks may be made a few months later, depending on the response.