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Bids invited for oil exploration blocks

The Government put 57 oil and gas blocks on offer - 19 deepwater, 9 shallow water and 29 onland blocks, reports Deepak Joshi.

business Updated: Dec 13, 2007 21:42 IST
Deepak Joshi

The Government flagged off the seventh round of the New Exploration Licensing Policy (NELP-VII) on Thursday and put 57 oil and gas blocks on offer. Of the 57 offers, 19 were for deepwater, 9 for shallow water and 29 for onland blocks.

“This is the largest-ever offering and we are expecting a good response,” Petroleum Minister Murli Deora said. The closing date for bids is April 11 and the government hopes to complete the process of signing contracts within six months from invitation of bids.

“We expect investments of $3-3.5 billion in NELP-VII as a part of the exploration commitment by the bidders,” petroleum secretary M.S. Srinivasan said.

Deora said several global players have shown interest in Indian E&P after significant gas discoveries by Reliance Industries, Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation (GSPC) and oil finds by Cairn India.

He declined to name any specific company that could bid in NELP-VII, but said steel baron Lakshmi N Mittal was likely to participate in collaboration with a domestic consortium. Deora hoped that E&P majors, who have so far kept away, would participate.

To encourage small and medium E&P companies, government decided that the technical capability for onland and shallow water blocks be made a pre-qualification criterion and no weightage be assigned for its evaluation. At the same time, a new consortium sub-criterion for deepwater blocks has been introduced as a technical capability parameter.

Drawing from its past experience of erratic financial bids, it has been decided that government's share of profit petroleum would be biddable against two tranches of pre-tax investment multiple (PTIM) between 1.5 and 3.5.

The shares of profit petroleum to government would be worked out on a linear scale with a positive slope depending upon the exact PTIM achieved in each of the preceding year. “This would ensure higher government share of profit petroleum with increasing PTIM.

The government has offered 162 exploration blocks in six rounds under NELP. Of the 49 oil and gas discoveries made in previous six rounds of NELP, Reliance Industries has made the highest number of discoveries with 29 (16 in its prolific KG-D6 block alone), while ONGC/Cairn have made 10. GSPC has made 7 discoveries.

“Two NELP blocks in Gujarat have entered the production phase with an output of three lakh cubic meters per day of gas and 750 barrels of crude oil per day,” Deora said. Production from RIL's KG-D6 will begin in July 2008, with peak output of 80 mmscmd. “This will increase domestic availability of gas by nearly 40 per cent,” he added.