09-04-09 India launched its biggest-ever auction of oil and gas blocks, expecting $ 3 bn investment in exploration of 70 areas on offer for bidding.
The 75 % import dependent nation also offered for bidding 10 areas for extraction of gas from below coal fields, known as coal bed methane (CBM), at a time when energy firms worldwide are cutting investments because of falling crude prices and economic recession.

"We are offering 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks for bidding in the eighth edition of New Exploration Licensing Policy (NELP)," Petroleum Secretary R.S. Pandey told.
Bidding for CBM-IV and NELP-VIII rounds will close on August 10, he said.

Asia's third-largest energy consumer is aiming to cut oil imports and has till now awarded 203 in the previous seven rounds with over $ 11 bn committed in exploration spend. Besides, 23 blocks have been awarded in the previous three CBM rounds. Over 6 tcf reserves have already been established in four CBM blocks.
"After seven rounds, the area under exploration has increased more than four times to 48 % of Indian sedimentary basin area from 11 % before implementation of NELP," he said.

Since its advent in 1999, NELP has given 68 oil and gas discoveries in Cambay onland, North East Coast and Krishna Godavari deep-water areas, leading to an accrual of over 600 mm tons of reserves.
"Reliance's (Industries) beginning production from its Krishna Godavari basin KG-D6 block will bring in more investors," Pandey said. "Besides, the start of crude oil production from Cairn India's Rajasthan fields, which is expected any day now, will augur well for the round."

Asked if economic slowdown would impact NELP-VIII, he said: "In our mind, the most effective antidote for meltdown is generation of economic activity."
Worldwide spending on oil and gas exploration may drop 12 % in 2009 to $ 400 bn, Barclays Capital Research has stated.
"Economic meltdown will not last forever, maybe 6 months or 12 months. The NELP-VIII bids will be finalised in 6-9 months by which time the world will enter a better phase," Pandey said.

Oil regulator V.K. Sibal said the KG-D6 field of Reliance in Krishna Godavari basin was just the tip of the iceberg and more surprises lie in store on the east coast.
"This is the best time to get exploration assets. It will be available more easily. So, I think medium to aggressive bidding (will be) there."

Previous explorations rounds have been dominated by local firms, mainly Oil and Natural Gas Corp, which had submitted aggressive bids to grab the acreages.
However, "if response is poor, we have the right of not awarding the blocks," Pandey said, adding, minor tinkering has been done with the bid evaluation criteria to make it more "pragmatic, precise and simple."

Of the deepwater blocks on offer, only one is from the prolific Krishna Godavari basin. The maximum 18 blocks are on offer in Andaman sea while five are in Kerala-Konkan basin. One block on offer is in Mumbai basin. The onland blocks are in Manipur, Assam, West Bengal, Madhya Pradesh, Haryana and Gujarat.
Of the CBM blocks on offer, two each are in Orrisa and Maharashtra. Jharkhand, Assam and Tamil Nadu have one block each and one is on the Madhya Pradesh-Chhattisgarh border.

Pandey said technical capability will not be a qualifying criteria for the 10 small onland blocks while for deepwater areas higher points have been assigned to companies having deepwater experience.
Of the blocks on offer, 30 % are old and recycled blocks. However, there are tax and policy issues, which are still not addressed and may force poor response in NELP-VIII. The government has withdrawn a seven-year income tax holiday on natural gas production, while the same for crude oil project has been retained.

Also, the pricing and marketing freedom guaranteed in NELP VIII have been compromised upon as evident in case of RIL's KG-D6 discoveries where the government first took it upon itself to fix the rates of natural gas and then dictated individual customers, who the fuel has to be sold to.
Pandey said NELP-VIII would be completed in four months and a follow-on offer of more blocks may be made a few months later, depending upon the response.

India had offered 57 blocks in NELP-VII last year and awarded 44 to companies like BHP Billiton and ONGC. In the first six rounds, 162 areas with an investment commitment of $ 8.33 bn were awarded.
Reliance was awarded KG-D6 block in the first round of NELP in 1999 and it began gas production. 80 mm cmpd of peak output from KG-D6, expected in a year's time, will double gas production of Asia's third largest energy consumer.

Of the total committed investment of $ 8.33 bn received in the first six rounds of NELP, $ 3.887 bn had already been spent by oil and gas companies till March 2007.
Of the $ 8.33 bn promised investment, the largest commitment of $ 3.32 bn was received in NELP-VI where 52 out of 55 blocks on offer were grabbed.