India launches NELP-VIII, offers 70 areas for bidding

New Delhi, Apr 9 (PTI) India Thursday launched its
biggest-ever auction of oil and gas exploration blocks,
offering 70 areas for bidding.

"We are offering 24 deep-sea blocks, 28 shallow water
blocks and 18 onland blocks for bidding in the eighth edition
of New Exploration Licensing Policy (NELP)," Petroleum
Secretary R S Pandey told reporters here.

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 will close on
August 10, he said.

India had offered 57 blocks in NELP-VII 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.

"Reliance (Industries) beginning production from its
Krishna Godavari basin KG-D6 block will bring in more
investors," Pandey said.

The company was awarded KG-D6 block in the first round of
NELP in 1999 and it began gas production last week. Eighty
million cubic meters per day of peak output from KG-D6,
expected in a year's time, will double gas production of
Asia's third largest energy consumer.

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-VI where
52 of 55 blocks on offer were grabbed.

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.

However, there are tax and policy issues, which are still
not addressed and may force poor response in NELP-VIII. The
government has withdrawn a seven-year income tax holiday on
natural gas production, while the same for crude oil project
has been retained.

Also, the pricing and marketing freedom guaranteed in
NELP have been compromised upon as evident in case of RIL's
KG-D6 discoveries where the government first took it upon
itself to fix the rates of natural gas and then dictated
individual customers, who the fuel has to be sold to.

Pandey said NELP-VIII would be completed in four months
and a follow-on offer of more blocks may be made a few months
later, depending on the response. PTI ANZ
PMR
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