DGH, which regulates the oil exploration business, may modify the rules in the next round of bidding under New Exploration and Licensing Policy.
NEW DELHI: The directorate general of hydrocarbons (DGH), which regulates the oil exploration business, is likely to modify the rules in the next round of bidding under the New Exploration and Licensing Policy (NELP-VII). Among other things, oil companies which have surrendered the blocks awarded to them two years before NELP-VII may be barred from bidding for them again. They may, however, be able to bid by joining a consortium with a different lead operator.
On the other hand, to enable more medium and small operators to enter the bidding process, the DGH has sought to eliminate the 15% weightage given to technical capabilities in the case of onland and shallow water drilling. Instead, technical capabilities will be part of the pre-qualification criteria.
Under NELP, bids for offshore and onshore blocks are evaluated on the basis of financial, technical and minimum work programmes (drilling) promised by the bidders. Each of the three is assigned different weightages.
State-owned Oil and Natural Gas Corporation and Reliance Industries Ltd (RIL) have relinquished a large number of blocks in the recent past. The DGH, which conducts the bidding for oil and gas blocks in the country, had blackballed ONGC from 12 deepwater and four onland blocks, despite being the highest bidder, because it had relinquished the blocks earlier. But the bids were restored on intervention at the highest levels.
The seventh NELP round, which is expected to be announced in April, may also see the DGH proposing a cap on the number of blocks companies can bid for.
However, officials are not sure if this plan can be implemented since there is a likelihood of some blocks not receiving any bids at all.
A cap could also force winning bidders to seek court intervention.
With regard to the net present value (NPV) method of calculating the government's profit share from oil discoveries, the DGH has proposed its continuation since it seems to be the most scientific. Reliance Industries' bids for seven blocks were recommended for renegotiation the last time due to the erratic profit-shares offered to the government.
But the bids were found to be the highest under the NPV method. NPV is a way of valuing a future revenue stream after discounting for time and other costs.
In another possible change, the DGH has suggested that technical capability for onland and shallow water blocks should be made a prequalification requirement and not be given weightage in the evaluation of bids. This has been proposed in order to encourage medium and small size exploration and production companies to start bidding.
"The present 15-point weightage for technical qualification can be transferred to the minimum work programme (MWP), taking MWP weightage to 40 in type A blocks and 50 in type B," said an official (see table on weightages).
In contrast, for deep water blocks, the DGH has proposed that more weightage be given to technical capability, with 10 points being transferred from the fiscal package to it. "This translates into 30 points for technical capability, 20 for MWP in the case of type A blocks and 30 in the case of type B. It is 50 for fiscal package in type A and 40 in type B".
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