Reliance steps up negotiations for NELP blocks

Vol 3, PW 22 (24 Nov 99) Exploration & Production

All eyes are on Reliance Petroleum, as it steps up efforts to negotiate a mutually acceptable profit-share agreement with oil ministry officials.

Reliance surprised everyone in the Indian oil industry with its aggressive bids for acreage under the New Exploration Licensing Policy (NELP). This report has it on good authority that the company will be awarded 12 of the 14 concessions for which it bid, based mainly on aggressive work programmes, which promise exploration wells in Phase 1.

Indian oil ministry officials, however, are unimpressed by the profit share agreement Reliance proposes with the government, once its exploration costs are recovered. When the project economics improve the government expects a bigger share, a source tells this report They (Reliance) were told to go away and come back with a better offer.

With luck, this better offer should become apparent when a delegation of Reliance officials from Mumbai - led by their ex-ONGC negotiator, IL Budhirajah arrive at the oil ministry for further negotiations on Wednesday (24th November) and Thursday (25th November) this week. Talks between the two sides are being closely watched by a host of oil and gas service contractors, who are salivating at the thought of doing business with a corporate, private sector client with deep pockets and unencumbered by the red tape so prevalent at ONGC.

The three big overseas contractors operating in India, PGS Reservoir, Western Geophysical and Schlumberger generate the bulk of their revenue in India with contracts from ONGC. All are now well-placed to pick up significant service contracts from Reliance.