Nelp VIII puts 70 blocks on the block

The Ministry of Petroleum and Natural Gas on Thursday launched the eighth round of auctions for land and water blocks under the New Exploration Licensing Policy (Nelp VIII).

As many as 70 blocks around the country are on offer for exploration by oil and gas companies.

“This is the highest number of blocks we have offered for exploration in any round of the Nelp so far,” said R S Pandey, secretary, Ministry of Petroleum and Natural Gas.

The ministry has also simultaneously offered 10 blocks of coal bed methane to explore and produce gas under the fourth round of auctioning.

“We have tried to make the bidding criteria more pragmatic, precise and simple to attract more investment into exploration and production activities,” Pandey added.
Interested companies have time till August 10 to submit their bids.

The latest round, however, may not attract desired investments as corporations across the globe face a liquidity crunch due to lack of availability of funds following an economic slowdown.

Also, there is no clarification yet on whether gas production will be taxed, said Amit Mishra, research analyst, ICICI Securities, who expects the response to be “more or less the same as for the seventh round.”

The Ministry of Finance had ruled just before Nelp VII that a seven-year tax holiday available to production from the awarded blocks will not be applicable to production of gas. The confusion had led to investors shying away from bidding aggressively for the blocks on offer in Nelp VII.

The matter is still under the government’s consideration, Pandey said.

The government, however, expects Nelp VIII to be better than the previous round, V K Sibal, the director general of hydrocarbons said.

“Nelp VII was impacted by the repeated delays,” he said, adding, “We created so much of confusion, while the investors had their own strategies and budgets.”

Pandey claimed that Nelp VIII would help counter the slowdown. “The most effective antidote to an economic slowdown is to generate as much economic activity as possible,” he said, adding, “Investors are expected to take a long-term view while bidding.”

Experts, however, beg to differ.

“The sentiment is weak across domestic as well as foreign companies,” said Mishra of ICICI Securities.

“The commitments will be lower for the smaller blocks on offer, which may attract many smaller players, but even they might not be very aggressive,” he added.

India has attracted $9 billion worth of investments and realised a production of 600 million tonne of oil equivalent through awarding 203 blocks so far under Nelp. It is keen to cash in on the recent discovery of huge gas reserves in the Krishna-Godavari basin by Reliance Industries and oil reserves in Rajasthan by Cairn India to attract further investments. Both the blocks were awarded in the pre-Nelp regime.