Govt likely to launch 10th round of oil & gas block auction in Jan

As many as 86 blocks or areas may be offered for exploration of oil and gas under New Exploration Licensing Policy

India may launch its largest ever auction of oil and gas block next month at completely revamped terms after the current profit-sharing regime came in for sharp criticism from CAG.

As many as 86 blocks or areas may be offered for exploration of oil and gas in the 10th round of New Exploration Licensing Policy (NELP) around mid-January.

NELP-X will be held on new terms wherein a bidder will be asked to quote the amount of oil or gas output it is willing to offer to the government from the first day of production, Oil Secretary Vivek Rae said.

The terms are same as the ones a panel headed by Prime Minister's Economic Advisory Council chairman C Rangarajan has suggested for future production sharing contracts (PSC).

The company offering the highest share of oil or gas produced from the field would get the block, Rae said.

Currently, oil companies are allowed to first recover the entire cost of exploration and production and only then share the profit with the government.

This approach had been criticised by the Comptroller and Auditor General of India (CAG) on the ground that it encouraged companies to delay the government's getting larger share by increasing capital expenditure.

"We are going to the Cabinet shortly for approval of the production-linked payment regime for NELP-X," he said.

Production-linked payment regime is considered more transparent, requiring less intervention in routine exploration and development activities.

Though a shift to the new regime may not result in more revenues for the government, it will ensure that if the companies earn more, the government to gets a progressively higher revenue.

It will also safeguard the government's interest in case of a windfall arising from a price surge or a surprise geological find. This will create greater transparency and foster a hassle-free operational environment.

Rae said clearance for blocks identified for offering in NELP-X is in process.

If all 86 blocks are offered, NELP-X will be the largest bid round ever since the advent of NELP in 1999.

A total of 254 blocks have been awarded in the previous nine rounds even as response was tepid in last few auctions.

Of the 34 areas offered in NELP-IX in 2010, bids were received for 33 blocks at the close of bidding on March 28, 2011. Of these, only 19 blocks were awarded.

NELP-VIII was the largest round with 70 blocks being offered. But only 32 blocks could be awarded. In NELP-VII, 41 blocks out of the 57 areas offered were awarded while NELP-VI was by far the most successful round with 52 out of 55 blocks on offer finding bidders.

The first five bid rounds saw award of 107 blocks.