34 blocks put up for auctions under Nelp-IX

An optimistic government today launched the ninth round of bidding under the New Exploration and Licensing Policy (Nelp), putting up 34 oil and gas blocks for auction. The last round was marred by a poor response, with 34 of the 70 blocks getting no response and half the awarded blocks going to government-owned Oil and Natural Gas Corporation.

The petroleum and natural gas ministry was expecting investment of around $14 billion in this round of auctioning, said Petroleum Minister Murli Deora. Interestingly, the government managed to attract only $1.1 billion in the eighth round, launched in the midst of the global economic slowdown.

The government has so far awarded 235 blocks under Nelp, launched in 1999. Of the blocks offered in the ninth round, eight are deepwater, seven in shallow water and 19 blocks onshore.

As many as 15 blocks on offer have been recycled after they were surrendered by companies that made no discovery. ONGC had surrendered five of these blocks.

Initial exploration period will be four years and total exploration period seven years in respect of onland and shallow water blocks. But, in respect of deepwater and frontier areas (the Northeast and less-explored basins), initial exploration period will be five years and total exploration period eight years.

The ceiling limits for procurement procedures of goods and services have been increased, considering the rise in input cost in the international market. Maximum points earmarked for 2D seismic evaluation will be awarded to bidders offering to undertake 3D seismic work for the entire block. The 2D seismic Mandatory Work Programme (wherever applicable) will be waived in case bidders offer to undertake 3D seismic work for the entire block.

On the issue of tax holiday for natural gas production, Petroleum Secretary S Sundareshan said there was no ambiguity. The government had, in the last Budget, extended income tax holiday on production of gas from blocks awarded in the eighth round of bidding. There is no clarity on whether the tax benefit is available to gas produced from the previous rounds, pending decision of various courts.

Sundareshan said the proposed Direct Taxes Code, to be implemented from April 2012, had done away with profit-linked incentives for all sectors. Instead, an investment linked incentive would be available, he said.

The exploration coverage of India’s sedimentary basin has expanded from 11 per cent to 58 per cent after the introduction of the Nelp regime. “The discoveries made under Nelp have resulted in in-place hydrocarbon reserve accretion of a staggering 642 million tonnes of oil and oil equivalent gas,” Deora said.

Sundareshan blames Cairn
Petroleum Secretary S Sundareshan dismissed apprehensions of Cairn Energy CEO Bill Gammell that delays in government approval for $9.6-billion Cairn-Vedanta deal would hit investment in the oil and gas sector. He, instead, blamed Cairn for the delay, saying it sought the government approval late.