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Exploration blocks on offer under new exploration licensing policy – fourth round (NELP - IV).
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Indian Oil And Gas Roadshow Comes To Town

In late June, Perth played host to a high-level Indian delegation keen to sell Indian exploration blocks currently on offer in the fourth round of the New Exploration Licensing Policy (NELP IV).

Confirming its reputation as a regional petroleum hub, Perth was the fifth and final stop for the delegation in a five week promotional tour that started in New Delhi and subsequently took in London, Calgary and Houston.

Some 38 companies attended the Perth leg of the tour including BHP Billiton, ChevronTexaco, Japan National Oil Corporation, Woodside, Roc Oil and Marubeni.

The delegation comprised the Indian Minister of Petroleum and Natural Gas, Ram Naik, as well as senior bureaucrats from the MPNG and the Directorate General of Hydrocarbons.

Naik told Perth delegates that India was keen to increase its self-sufficiency as the country currently imports about 70% of its petroleum needs, which cost the nation a princely sum of $US17 B last year.

Recognising this need, Naik said the Indian government formulated a comprehensive policy, dubbed 'India Hydrocarbon Vision 2025', to tackle the energy security needs of the country.

In it, the paper called for an aggressive approach to domestic exploration; increasing production/recovery from existing fields by utilising the latest technology; acquiring equity in oil and gas fields abroad; and developing non-conventional sources such as coalbed methane (CBM).

It also called for the introduction of ethanol blending with petrol and pilot projects on biodiesel.

To stimulate petroleum exploration in India, in 1999 the government introduced NELP. In the first two rounds, 47 blocks were awarded to local and international players. Bids for 23 blocks were received for the third round. In the decade prior to the introduction of NELP, only 22 blocks were awarded.

In the latest round, India is offering 24 blocks – 12 deep water, 11 onshore and 1 shallow water block. The 11 inland blocks are located in the States of Assam (1), Bihar (1), Gujarat (3), Manipur (1), Nagaland (1), Rajasthan (1), Tamilnadu (2) and Tripura (1).

Of the 12 deep water blocks, eight are located on the east coast, while four are located on the west coast. The shallow water block is located on the east coast.

The current round also includes two highly prospective blocks in the Andaman sea, in the Bay of Bengal, which are being offered for the first time.

According to the oil and gas newspaper, Upstream, several domestic as well as foreign oil companies are expected to bid aggressively for the deep water blocks in the Andaman Sea because "the blocks are perceived to be floating on gas".

Gazprom, Total and BG have all indicated preliminary interest in the blocks on offer, especially the deep water acreage, according to Upstream.

The paper said that domestic players, ONGC and Bombay-based Reliance Industries, are both expected to bid aggressively for the maximum number of blocks available. "ONGC and Reliance are expected each to bid on more than 20 of the total 24 blocks on offer", Upstream said.

To reassure other explorers and investors about the prospectivity of the blocks on offer, Naik spoke of India's exploration successes since the introduction of NELP.

Naik said a total of 16 discoveries has been made by private operators in the last three years. In addition, domestic giants such as ONGC and Oil Limited have made 31 and 14 discoveries respectively in the same period.

"It was in India that the world's largest gas discovery in the Krishna-Godavari basin was made for the year 2002", Naik said.

The operators in Krishna Godavari, Reliance Industries and Niko Resources, have recently upgraded their initial reserve estimates from 7 Tcf to 14 Tcf.

"These discoveries are of momentous significance as they firmly place India on the deep water and ultra deep water oil and gas map of the world", Naik said. "With the implementation of an aggressive exploration programme, more and more discoveries are expected to be made in the future."

To further underscore his argument, Naik mentioned that ONGC made a huge gas discovery, Vasai, off the west coast of India earlier this year, with initial estimates putting gas in-place in excess of 30 MMt.

While the Indians are eager to develop indigenous sources, this has not stopped them from farming into foreign acreage and production. The Indians now source petroleum from fields in such exotic locations as Libya, Burma, Sudan, Vietnam and Russia.

Last December, first equity gas by any Indian from Vietnam was brought into commercial production, while earlier this year, first oil reached Indian shores from the troubled African nation of Sudan.

The Indian delegation also said they were keen to farm into any Australian brownfield or greenfield project should the opportunity arise.

Another important plank of Indian's energy vision is the development of non-conventional sources such as CBM. Naik said Australia could leverage its experience as one of only five countries currently involved in CBM exploration and production.

The Indians launched the second round of bidding for nine coalbed methane (CBM) exploration blocks in May, which augments the eight blocks awarded last year, in the first ever bidding round under the National CBM policy.

Naik also used the occasion to dispel the myth that the nation of one billion-plus people was a difficult place to do business. After a review of the Model Production Sharing Contract, Naik said India now offers one of the most competitive fiscal and contractual regimes in the world.

"The MPSC has found wide acceptance from exploration and production companies. On the fiscal front, there is good news for foreign companies, with removal of the surcharge on income tax", Naik said.

"This is in addition to other attractive fiscal terms such as tax holidays, liberal set off of expenses and the fiscal stability that has been part of NELP."

Some of the major stakeholders in India's upstream petroleum sector, namely Cairn Energy and ONGC, also made presentations about their experiences, successes and plans for the future.

UK independent Cairn Energy operates the producing Ravva oil and gas field, and deep water exploration blocks in the Krishna-Godavari basin offshore Eastern India. It also operates an offshore block in the Camby basin in Western India in which has been made several oil and gas discoveries.

The two companies emphasised the strong fundamentals as well as the attractiveness of the E&P sector in India. They concluded that the investment climate in India was positive, with very attractive fiscal terms under NELP.

Brian Shanahan from JP Morgan gave a presentation from the perspective of an investment banker. Shanahan said India's huge market, political stability and progressive reforms and policies make it a favourable environment for investment.

He said there remains significant upside to its petroleum resources and its huge market cannot be ignored for much longer.

Naik said data viewing centres have been opened in Houston, London and New Delhi. Interested companies can purchase the data in New Delhi from the Directorate General of Hydrocarbons.

Information such as salient technical data on the blocks on offer, the bid documents and highlights of NELP IV are available at a special website at www.indigopool.com. The information can also be accessed from the Ministry's official website www.petroleum.nic.in as well as www.dghindia.org

The bid closing date for exploration blocks in the current round was September 30th 2003. "We will evaluate the bids, award the blocks and make all the efforts to sign the contracts before the end of the year", Naik said.

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