A Pakistani model for India's upstream licensing rounds

Vol 4, PW 2 (01 Mar 00) People & Policy
     

It is not often Pakistan can claim to be ahead of India, least of all on the issue of transparency.

In the upstream sector, however, it is leagues ahead. At least that is the opinion of global upstream majors with experience of both countries.

In the following contribution, a senior executive with experience of Pakistan and India summarises the difference between the two systems and calls on India to open up winning NELP bids to public scrutiny. "Are there any plans to make public the work commitments and contract terms bid by the winning companies and consortia under India's New Exploration Licensing Policy (NELP) When promoting NELP, India's Directorate General of Hydrocarbons (DGH) made a strong case for "transparency" in the awards.

Perhaps naively, one would expect this would mean that at least the winning bids are made public at the time of contract signature. Despite all its political and economic problems, Pakistan has had a wonderful licensing policy for years, which leaves India trailing.

The winning bids are made public and the losing bids normally come out too. This is wonderful in weeding out corruption: recently one exploration block was awarded to a company that committed to drill two wells, whereas a losing company had committed to drill four.

Corruption exists in Pakistan but it is a more transparent form than elsewhere! "Pakistan has an open acreage licensing system. If a company likes a piece of open acreage, then it can go to the DGPC (equivalent of DGH) and submit a bid.

The company draws the block boundaries as it chooses but within a set of guidelines, and it bids work commitment (kilometres of seismic, and number of wells) based upon an existing contract with tax, etc, built in. The DGPC publishes the block as available for competitive bidding (without naming the first bidder or what has been bid).

Bids close one month after DGPC publishes the coordinates. If the original bidder is outbid by a subsequent bid, that first bidder has matching rights, i.

e. if they match the higher bid, they get the block with that commitment.

The winning bid is detailed in terms of: آ· line kms of seismic آ· number of wells and any minimum depth commitments آ· and total minimum $$ commitment Take a look at a license map of Pakistan and you will not see many blank areas. It is the same with Bangladesh, which has its own issues, but is less suspicious of upstream foreign investment than India.

This is for a number of reasons, including that OGDC has had more of its monopoly powers removed than have ONGC and OIL. This includes the issue of data availability.

In India, the DGH cannot yet mandate ONGC to hand over data which ONGC considers to be its property in perpetuity. I have compared the Indian system to that in Pakistan to Avinash Chandra, head of the DGH.

As a minimum India needs to make public the work commitments of the winning bidders: seismic wells; and $$. As "the winning bid" is determined by the DGH on other factors too, including profit oil split, and cost oil recovery schedule, these too should be published, so that losing bidders have recourse to complain in the event that they feel aggrieved.

If this does not happen, how can anyone judge if the system is fair, or corruptible"