The Telegraph
Tuesday , January 7 , 2014
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Drill for oil hunt to start next week

New Delhi, Jan. 6: The government will launch the tenth round of bidding for 56 oil and gas blocks under the revamped rules next week.

“We will profile 56 blocks at the Petrotech conference next week. But notice inviting tender (or bids) will come out some time next month,” oil secretary Vivek Rae said on the sidelines of an industry event here.

The 10th round of auction under the New Exploration Licensing Policy (Nelp) will require bidders to quote the amount of oil or gas output they are willing to offer to the government from the first day of production, he said.

The terms, which are different from the bid conditions of the previous rounds, were suggested by a panel headed by C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council.

The bidder offering the highest share of oil or gas will win the block, Rae said.

At present, oil companies can recover the cost of exploration and production before sharing profit with the government. This often results in a conflict with the government and its auditors, with the oil explorers being accused of inflating costs.

“We are proposing to move to a revenue-sharing model from the current production sharing scheme. There will be no profit petroleum, no cost recovery, no investment multiple,” he said.

The shift from the production sharing regime, where operators are first allowed to recover costs, to a revenue-sharing model will, however, require a final approval by the Union cabinet.

“We are going to the cabinet shortly for approval of the production-linked payment regime for Nelp-X,” Rae said.

The government is hopeful that the new norms on pricing and revenue sharing will attract more global bidders.

The current price of natural gas at $4.20 per million metric British thermal unit is expected to double from the beginning of the next fiscal. Further, there will be no cap on the price as they will be based on the global gas price movement at major consumption hubs.

This is expected to be an incentive for global players such as BP, Royal Dutch Shell, Total, Chevron, ConocoPhillips, Santos and China National Petroleum who had recently participated in the oil and gas bids in Myanmar and Bangladesh.

India’s ninth round of oil hunt had attracted 74 bids for 33 of the 34 blocks on offer. ONGC, Oil India and Reliance were among the big winners. Global participation, however, was limited.

LPG quota

Rae said the oil ministry had not proposed to raise the quota of subsidised LPG cylinders to 12 per household in a year from nine. “There is no proposal in my ministry,” he told reporters.

Finance minister P. Chidambaram had last week said there were demands for raising the quota of subsidised cylinders and the government “will look into” them.