New NELP Policy

To decrease dependence on oil imports and to increase domestic production of natural gas, India has launched its biggest-ever auction of oil and gas exploration blocks under eighth edition of New Exploration Licensing Policy (NEPL). On the offer are 70 areas for bidding, including 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks.

The Government has always made an endeavour to attract domestic and foreign oil companies to bid for the exploration rounds. Though the concentration has been more on the foreign majors but the response has been lukewarm since foreign oil companies are looking for more lucrative blocks and easier government norms while investing in countries in search for oil, say oil experts about the prospects of India’s oil exploration round.

Increasing Demands
NELP-VIII will be completed in four months and a follow-on offer of more blocks may be made a few months later, depending on the response. Alongside NELP-VIII, the Government also offered for bidding 10 areas for extraction of gas, known as coal bed methane (CBM), from below coal fields.

Bidding for CBM-IV and NELP-VIII rounds would close on August 10, 2009. Asia’s third-largest energy consumer is aiming to cut oil imports and has till now awarded 203 in the previous seven rounds with over $11 billion committed in exploration spend.

In the latest auction, India for the first time offered exploration blocks in western Andaman, an area which is close to hydrocarbon-rich parts of Indonesia and Myanmar. So far, five blocks have been awarded in the eastern Andaman and in the current auction, 18 blocks will go under the hammer.

Investment Commitment
India had offered 57 blocks in NELP-VII in 2008 and awarded 44 to companies like Reliance Industries, BHP Billiton and Oil and Natural Gas Corporation (ONGC). In the first six rounds, 162 areas with an investment commitment of $ 8.33 billion were awarded.

Since its advent in 1999, NELP has given 68 oil and gas discoveries in Cambay onland, North East Coast and Krishna Godavari deep-water areas, leading to an accrual of over 600 million tonnes of reserves.

In its tryst to become less dependent on foreign countries for crude oil, India has offered the largest number of oil and gas blocks on auction.

Under the NELP blocks offered so far, 49 oil and gas discoveries have already been made in Cambay onland, North East Coast and Krishna Godavari deep-water areas, asserting over 600 million tonnes of reserves.

The Government is offering the highest number of exploration blocks — 70 blocks covering a sedimentary area of about 1,63,535 sq km. The blocks include 24 deepwater blocks, 28 shallow-water blocks, eight on-land blocks and 10 type S blocks this time in the eighth round of the NELP-VIII. About 70 per cent of the oil consumed by the country is imported. The extreme volatility in the recent past in the international crude oil prices had put a large burden on the exchequer as the Centre subsidises sale of petrol, diesel, kerosene and cooking LPG in the country.