Wait longer before NELP-IX contracts signed

Vol 15, PW 4 (25 Aug 11) Exploration & Production

Nearly a year on and you might have forgotten there was a NELP-IX licensing round.

But yes, we hear the oil ministry has at last prepared a ‘note’ listing provisional winners for 33 of the 34 blocks offered in the last round. This ‘note’ is likely to be discussed in the days ahead by a specially constituted panel of high-powered government officials, known as the Empowered Committee of Secretaries (ECS).

“No date has yet been fixed for the (ECS) meeting,” confirms a DGH source. “But it will happen soon.

” Once the ECS endorses the ministry’s list of provisional winners, he adds, the file will go to India’s cabinet for final approval. Another two months will then pass before PSCs are signed.

Under pressure, the DGH deflects criticism of any delay in awarding blocks from NELP-IX, launched on October 15, 2010 for 19 onland, seven shallow water and eight deepwater blocks. A source stresses that the DGH evaluated all bids received at the Hotel Shangri-La in Delhi on March 28, 2011 and sent its recommendations to the ministry in May.

Most interest centred on the 19 onland blocks, we learn. Among eight new Indian companies to bid are Sankalp Oil and Gas, Chinar Commerce, Ishar Gas Oil and Pratibha Oil and Natural Gas.

Seven 'foreign' companies also bid: East West Petroleum, Birkbeck Investments, Heramec, Cairn Energy, BHP Billiton, BG and Deep Energy. Our DGH source says many foreign investors were discouraged from bidding by an announcement from finance minister Pranab Mukherjee that the government would scrap a seven-year tax holiday on oil and gas production from blocks from NELP-IX and future rounds.

Mukherjee’s announcement in the budget speech on February 28 came exactly one month before the NELP-IX bid deadline and, “sent a bad signal that discouraged potential bidders,” believes the DGH.