India relaunches largest auction of oil, gas areas

India relaunches largest auction of oil, gas areas

Petroleum Minister Murli Deora kick-started the offer of 70 oil and gas exploration areas in the 8th edition of New Exploration Licensing Policy (NELP) and 10 coal bed methane (CBM) blocks with the first roadshow here.

"NELP can be portrayed as India's success story in our endeavour to achieve self-sufficiency in hydrocarbons," he said at the promotional roadshow.

Under NELP, 71 oil and gas discoveries have already been made in 21 exploration blocks by accretion of in place hydrocarbon reserves of more than 600 million tonnes of oil equivalent, he said.

"Major natural gas production in KG basin commenced from April. With this, the gas production in the country would be doubled, and in monetary terms it would be about USD 42 billion."

Total committed investment in NELP rounds for exploration so far is around USD 10 billion, out of which USD 5.3 billion in exploration has been made. Further, USD 6.6 billion will be invested towards development of the Exploration and Production sector.

Deora said the last date of bidding for the nation's largest ever auction of oil and gas blocks is October 12.

A revised timetable has been drawn after Finance Minister Pranab Mukherjee extended the 7-year income-tax holiday to natural gas production.

India had on April 9 launched the eighth round of auction of blocks for exploration under NELP with August 10 being the last date for bidding. But it was deferred over ambiguity on the availability of tax holidays for natural gas.

After Mumbai, roadshows will be held in Houston (August 20-21), Calgary (August 24-25), London (September 8-9), Perth (September 22) and Brisbane (September 24-25).
Data centres have been set up at oil regulator DGH's office in Noida, on the outskirts of the national capital, London, Calgary, Houston and Perth, he said.

The round is being relaunched after Mukherjee in his Budget for 2009-10 said that seven years holiday from payment of income tax on profits earned from production and sale of natural gas would be available for blocks to be awarded in NELP-VIII.

India is offering 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks for bidding in NELP-VIII hoping to attract USD 3 billion investment in exploration.

The 75 per cent import-dependent nation has also offered for bidding 10 areas for extraction of gas from below the coal fields or CBM.

The Government had launched NELP-VIII and CBM-IV on April 9 and bids were to close on August 10.

Fearing investor backlash on ambiguity over the tax holiday for natural gas, the government had on April 17 deferred the promotional roadshows.

The Finance Ministry had in 2008-09 Budget scrapped the seven-year tax holiday or exemption from payment of income-tax on natural gas production.

Though oil and gas naturally occurred together and a single well could be producing both, the incentive was restricted only for crude oil production.

The move drew flak from oil majors who kept away from the previous NELP-VII round that closed after the announcement. Asia's third-largest energy consumer is aiming to cut oil imports and has till now awarded 203 blocks in the previous seven rounds with over USD 11 billion committed as exploration spend.

Besides, 23 blocks have been awarded in the previous three CBM rounds. More than six trillion cubic feet reserves have already been established in four CBM blocks.

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

Worldwide spending on oil and gas exploration may drop 12 per cent in 2009 to USD 400 billion, Barclays Capital Research has stated.

India had offered 57 blocks in NELP-7 last year and awarded 44 to companies like BHP Billiton and Oil and Natural Gas Corp (ONGC). In the first six rounds, 162 areas with an investment commitment of USD 8.33 billion were awarded.

Of the total committed investment of USD 8.33 billion received in the first six rounds of NELP, USD 3.887 billion had already been spent by oil and gas companies till March 2007.
Of the USD 8.33 billion promised investment, the largest commitment of USD 3.32 billion was received in NELP-6, where 52 out of 55 blocks on offer were grabbed.