Gujarat ready to offer acreage in future exploration rounds

Vol 4, PW 1 (16 Feb 00) Exploration & Production

Gujarat Indias richest onshore oil province - appears ready to allow concessions from the state to be tendered in a future exploration licensing round.

In the last round, no concessions from Gujarat or Assam were tendered, because of local government opposition to the New Exploration Licensing Policy (NELP), which lowered the level of royalty paid by oil companies to the state government from 20% on the price of a barrel to 12.5%. Critics accused the Gujarat state authorities of using this issue as a smoke screen to reserve the best acreage for state-run Gujarat State Petroleum Corporation.

Today, however, opposition to the lower royalty rate in Gujarat appears to have diminished. This is due mainly to the soaring price of crude oil.

A senior government official in Gujarat tells Petrowatch that the strong price of crude was the single biggest factor behind the decision to agree to the lower royalty rate for onshore concessions offered by the central government under NELP. Crude oil discovered under NELP is paid the prevailing market rate, currently around $27 a barrel.

Oil minister Ram Naik confirms that the Gujarat government has written to the oil ministry with an assurance that it will agree to NELP terms, under certain conditions. Gujarat is believed to be seeking an undertaking that the royalty rate will not drop below 12.5%; that it should receive 50% of the governments share of profit oil; and that no blocks should in future be awarded to ONGC on a nomination basis.

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