ONGC set to bag 10 blocks in Nelp-IX

Oil and Natural Gas Corporation (ONGC) has emerged the provisional winner for close to 10 out of the 29 blocks it has bid for in the ninth round of the New Exploration Licensing Policy (Nelp). The bids concluded today. It had won nearly two-thirds of the blocks offered in the previous rounds.

Reliance Industries (RIL), which stayed away the last time, is the front-runner for two of the four blocks for which it has bid. BP, which recently bought a 30 per cent stake in RIL’s oil and gas blocks, did not take part in the auction. This round is expected to draw an investment commitment of close to $1 billion (Rs 4,500 crore) as compared to $1.1 billion in the previous round.

Deep Industries is learnt to be the top bidder for four blocks. Oil India Ltd, Ishar Gas Oil and Sankalp Oil are leading in three blocks each. Chinar Commerce is the leading bidder for two blocks. Essar, Pratibha Oil, Focus, Prize, BG-BHP Billiton and PIC are front-runners for a block each. A total of 74 bids were received for 33 blocks. One block did not get any bid.

The $7.2-billion deal between RIL and BP, which was expected to increase the interest of big global companies in India’s oil and gas sector, did not make much impact. No new major overseas exploration company took part in this round too. Eight foreign companies bid this time compared to seven in the previous round.

Overall, the performance appears to be better compared to the eighth round, in which bids were received for only 36 of the 70 blocks on offer. That round was affected by withdrawal of a tax break for gas production and lower spending by oil companies during the global financial crisis.

Calling the response “satisfactory”, Petroleum Minister Jaipal Reddy said the bids would be evaluated in the next three months. It will take another month after that to sign contracts with the winners.

On the impact the delay in approval to Vedanta’s deal to buy Cairn India’s assets may have had on today’s bids, Reddy said full justice was being done to the foreign companies. If companies were not bidding, it was “not for want of an inviting atmosphere”, he said.

Experts, however, doubt the success of this round. “The purpose of a scientifically developed criteria to allocate blocks is to select companies that do their best to prove that Indian basins can help service energy needs. With exceptions, the response suggests a need to relook at the criteria and process. We all know it takes a decade to prove if the selection of the licensor was right,” said Deepak Mahurkar, associate director, PwC.

In the eight Nelp rounds since 1999, 235 blocks have been awarded. This has resulted in enhancement of exploration coverage from 11 per cent to about 58 per cent of the total Indian sedimentary basin area.