NELP VIII unlikely to attract much foreign interest: RIL

New Delhi, Mar 4 (PTI) Reliance Industries Ltd, the
company that has made the most oil and gas discoveries in
areas auctioned since 1999, Wednesday said the next auction,
scheduled in the coming few weeks, is unlikely to attract much
interest from global players.

The 8th bid round under New Exploration Licensing Policy
(NELP) is being held under the shadow of a global credit
crunch and low oil prices as well as crisis of confidence in
the policy regime offered by India.

"Previous NELP rounds saw people bidding like crazy. They
treated exploration acreage like real estate," RIL President
(International Business) Atul Chandra said at a conference
organised by Infraline.

The previous seven rounds were dominated by state-owned
explorers Oil & Natural Gas Corp (ONGC) and Oil India Ltd.

These firms made enormous investment and exploration
commitments to win the blocks. "Wednesday they are finding it
difficult to meet the commitments made," he said pointing out
that low oil prices are not commensurate with the steep rise
in oilfield service rates.

"The next NELP round is not going to be very attractive
because of low prices," he said.

Earlier Petroleum Secretary R S Pandey had said how many
blocks will be offered under NELP-VIII had not been finalised.
"The exercise is still on. We are in the progress of
identifying blocks and securing clearances for them," he said.

"We want to test the waters particularly in view of the
global financial meltdown," he added.

Also there are fiscal issues impacting the NELP round.
The Finance Ministry has withdrawn tax breaks for gas
production and it is only available for crude oil discovered.

This, despite the fact that more gas, like the giant
KG-D6 field of Reliance Industries, has been discovered in
NELP blocks and gas is a cleaner fuel and, unlike crude oil,
has negligible carbon footprint.

Also MAT and service tax have been imposed on exploration
and production. Simultaneously, the government has taken away
the promised marketing freedom for natural gas as was evident
in case of Reliance's KG-D6 field.

The Government not only took upon itself the right to fix
price or gas but is now even dictating which customers
Reliance has to sell the gas to.

The fiscal issues are likely to play havoc on the next
round of NELP, said Gokul Chaudhri, Partner, BMR Advisors.
Participation in the previous NELP round was impacted because
of tax issues and the next round "will be a disaster," he
added.