The much delayed seventh round of new exploration licensing policy (Nelp) will be announced by the Directorate General of Hydrocarbons before or in early January.
“The rounds would be announced either in the last week of December or in the first week of January. As we do not want any complications to arise after the rounds are announced, we are waiting for the clearance from the law ministry,” said a senior petroleum and natural gas ministry official, who did not wish to be identified.
If successful, the oil and gas generated from these blocks would help meet India’s growing energy needs and reduce imports, currently estimated at 70% of consumption.
Nelp was approved by the government in 1997 and operationalized in January 1999 to boost hydrocarbon exploration in the country. Under this, the government allocates the rights to explore blocks through a bidding process and has done this in six phases, so far.
ONGC’s oil drilling platforms at Bombay High. Global demand for rigs has already raised exploration costs and India has among the largest number of outstanding drilling commitments in the world.
The blocks, which were due to be announced in April, had been delayed due to a host of issues, including a claimed rig shortage and pending clearances from the ministry of environment and forests, as well as the ministries of coal and defence. This, when even the parliamentary standing committee on energy had commented that “the entire process (Nelp) can be completed in seven-eight months if the government makes concerted efforts to achieve the same.”
Demand for rigs globally has already raised exploration costs. The rentals for a deepwater rig, say industry analysts, have risen 60-70% over a period of three years to around $300,000 (Rs1.17 crore), while the rental for an ultra deep-water rig, excluding service costs, is $400,000. India has among the largest number of outstanding drilling commitments in the world.
“We are of the view that the rig shortage problem will ease out by 2009-10 and the blocks offered in Nelp-7 will only come up for exploration by 2011-12,” the official added.
The government proposes to offer 50 blocks as opposed to the 70 blocks that it had prepared to offer initially.
“It is important that we stick to the schedule as we need to send a positive signal to the Indian and overseas investors. Given the recent success we have had in our exploration and production efforts, we need to rapidly tap this potential from the energy security perspective,” said Ravi Mahajan, partner at accounting firm Ernst & Young.
To attract foreign players, the government had also proposed to market Nelp licences at roadshows in Houston, Calgary, London, Perth and Dubai.
The earlier Nelp rounds have seen participation from private oil and gas exploration and production companies as it provides a level-playing field to them by providing fiscal and contract terms similar to those accorded to state oil companies.