Nelp-VIII: Govt to stick to 'arm's length' formula

The government will stick to the policy of determining oil and gas prices at an ‘arm’s length’ in all its exploration rounds, including the eighth edition of the New Exploration Licensing Policy (Nelp), to be launched in Mumbai tomorrow.

“There should be no apprehension in the mind of investors. There is no change in the existing principles of Nelp. The earlier practice of fixing prices at arm’s length (which is the market price), subject to government approval before sale, will continue,” said R S Pandey, secretary in the ministry of petroleum and natural gas. Now that the provision of tax holidays for natural gas production under the eighth round has been announced, the investor should be happy, he added.

On April 9, the government had launched the eighth round of auction of blocks for exploration under Nelp, with August 10 being the last date for bidding. But it was deferred over the ambiguity on availability of tax holidays for natural gas. The round is being re-launched after Finance Minister Pranab Mukherjee, in his Budget for 2009-10, said a seven-year holiday from payment of income tax on profits earned from production and sale of natural gas would be available for blocks to be awarded in Nelp-VIII. After Mumbai, road shows will be held in Houston (August 20-21), Calgary (August 24-25), London (September 8-9), Perth (September 22) and Brisbane (September 24-25).

The eighth round will offer 70 oil and gas blocks covering an area of 170,000 sq km. This is the highest number of blocks to be offered in any round. Along with 70 oil and gas blocks, the government is also offering 10 blocks under the fourth round of the coal-bed methane (CBM-IV) gas exploration policy.

Since 1997, when the government launched the Nelp, it has awarded 206 blocks. Out of these, 68 discoveries of oil and gas have been made in 19 blocks, establishing reserves of 500 million tonnes of oil and oil-equivalent gas. An investment of $9 billion has been committed in the first seven rounds of Nelp.