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Pre-independence Era Nomination Era Pre NELP Era NELP Era OALP
a) Pre NELP and NELP discoveries (%) b) Breakup of Acreage pre-NELP and NELP (%)
22
18 16
I, 39
44
Pre-NELP, II, 7
29 NELP, 71 17
14
III, 12
50
IV, 7
Field, 3
20
V, 3
Pre-NELP I II III Moderate to Well Explored Unexplored Area
Though NELP has been quite successful to attract initial investment from private players in the E&P
sector; for the past three rounds, number of bids received has gone down in spite of increase in
number of blocks offered by the government. As can be seen in figure 2, bids received in round VIII
went down significantly to 76 from 181 in round VII and 185 in round VI. It is such an irony that in the
year when NELP got its best publicity in the form of commencement of production from KG Basin, it
attracted minimal interest. The feud over sharing of KG Basin gas and the consequent handling of the
issue by the government may have caused several doubts in the minds of many prospective investors
to keep them away from Indian E&P sector. Government’s actions or the lack of it over the last few
rounds of NELP have not been very encouraging for investors seeking free gas markets.
Reversal of Attractive Contractual Terms offered earlier
Under NELP, the government created a favourable policy environment to attract private and foreign
investors to E&P sector. It allowed for 100% foreign equity in the sector, streamlined the entire
process, granted attractive tax concessions, and most importantly, allowed the investors to sell their
gas at market clearing price. All the investments decisions were initially planned in light of these policy
guidelines.
However, any reversal or non adherence to these policies will disincentivise competitive markets and
may lead to destabilization of the initiatives taken up. The debate over tax-holiday of seven years
sparked-off after budget of 2008-09 because of change in definition of mineral oil. This implies that
tax-holiday is applicable for production of oil only, and not natural gas. The availability of seven year
tax holiday on production can have significant impact in the overall project economics of bidders and
lending agencies. Though, Finance Minister granted concession for production of gas in budget of
2009-10, this was only an exception for blocks allocated under NELP VIII. The ghosts of tax
concessions to natural gas have surfaced again and as a result the round IX of bidding has been
infinitely delayed by the government. However, it is important that such an anomaly is taken care of to
attract more investors for NELP IX. Irregularities and inconsistencies in policy environment can be
unfavourable for the healthy growth of Indian upstream sector.
Non participation of global majors
NELP has generated voluminous data and thereby given impetus to E&P activities and opened up
more acreage. However, critics of NELP have been very vocal about absence of major global E&P
players such as Exxon, Chevron and Shell from NELP, especially in the last two rounds where
Reliance and ONGC bagged nearly half the blocks. Global players would venture into Indian
upstream sector only when the prospectivity of Indian basins is ensured and continues to increase.
So for attracting these biggies, quality of technical data of the blocks must be improved. With
decrease in the number of bids with each round, importance of high quality and reliable data cannot
be overemphasized. In this regard the process of setting-up National Data Repository (NDR) has to
be put on fast track basis. NDR will be a national public pool of information which would validate,
store and maintain high quality and reliable geo-scientific data, crucial especially for those tracking
potential hydrocarbon reserves. Such a data repository would encourage more E&P activities by
providing high quality data for greater sedimentary area, in turn providing basis for long term energy
policy formulation.
However, setting up of NDR has already been delayed by almost a year. Tendering process only
began recently where four companies have placed their bids for the tender. As per DGH, this data
archive is expected to be operational by 2012; with that India would join a group of twenty countries
having similar database. Initiatives such as NDR can generate higher degree of interest among global
players and their participation via acquisitions or large exploration programs can then be expected.
OALP: A natural progression from NELP
Establishing of NDR is a calibrated move to switch from
Need of Indian E&P Sector:
NELP to OALP. OALP could give further fillip to E&P and
eliminate the micro-management by the regulator by National Data Repository
imparting a round the year flexibility in terms of selection and Open Acreage Licensing Policy
bidding of blocks from all the available acreages. The Clarity and stability in policy
primary difference between NELP and OALP is that blocks environment
are not predefined by the regulator, but are rather defined by
the party first expressing interest in the area. Hence, OALP is a round the year mechanism for
accepting bids unlike the current regime of periodic auction of government-defined blocks. A regime
like OALP is deemed to be a win-win situation for both the parties involved – regulator/government
and bidders. By being a round-the-year process, OALP grants the flexibility to the companies to enter
the segment whenever their resources permit so and allow them to focus on their domain of choice
and expertise. This can be the major selling point to attract global E&P players to India. Such a
regime also takes the pressure away from the regulator of micro-management of blocks, thus
reducing administrative efforts and costs. It has also been suggested that till the time NDR becomes
fully operational, NELP and OALP may co-exist. This would imply that certain pressure would be
maintained on regulators to release some blocks annually under NELP, while OALP takes its own
course.
In a nutshell, Indian E&P sector requires another boost from the policymakers after the first one came
in the form of NELP. Huge investments are required to drill the deepwater basins which can only
come from global E&P majors. The only way to attract them to Indian waters is to promote a stable
policy environment, improve the quality of technical seismic data and offer blocks round the year
which would give them freedom of entry to the sector. However, while data repository is still being
developed, NELP can’t be phased out; co-existence of OALP and NELP is imperative to take the
Indian E&P sector to the next level.