KOLKATA (miningweekly.com) - India will put nine oil and gas blocks up for auction before the end of the current fiscal year and will transition from production-sharing contracts (PSCs) to revenue-sharing agreements (RSAs) with successful bidders.
According to a senior government official, the auction of oil and gas blocks under the New Exploration and Licensing Policy (NELP) had been delayed by over a year, owing to framing of the changed contract terms. However, the tenth round of the auctions would be completed before the end of the 2015/16 financial year.
The Indian government was "determined" to hold the auctions under RSAs with oil and gas exploration and production (E&P) companies since PSCs with the successful bidders of the previous nine auction rounds had triggered several legal challenges and allegations of inflating capital costs in developing the blocks.
It was pointed out that, to date, the government had concluded 310 PSCs with domestic and foreign E&P majors and, over the past 15 years, 22 PSCs had ended up in legal arbitration following differences between the government and developer, the official said.
However, it was unlikely that the government would be able to usher in the Open Acreage Licensing Policy (OLAP) before the tenth round of the NELP auctions, the schedule of which had already been set. Under OLAP, E&P companies would be permitted to submit bids without waiting for the announcement of NELP auctions.
To avoid the poor response from international E&P companies experienced in previous auctions rounds, the government was also pushing for greater incentivisation for domestic and global bidders.
One of the measures under consideration and expected to be put into play ahead of the next auctions was to offer a "premium pricing regime" in the case of oil and gas blocks considered to be geologically difficult and for new discoveries in difficult or inhospitable terrains.
The contours of such an incentive regime had already been finalised, but officials declined to divulge details, pleading that the formula was yet to be cleared by the Cabinet Committee for Economic Affairs, the government’s apex body.
But an official added that the government was trying to get to grips with the fine print, taking extra precautions owing to the apprehension over the low response from oil and gas companies, as well as falling capital expenditures as a result of the lower oil price.
In March 2013, the government allocated 261 oil and gas blocks under NELP, which had brought in investments to the tune of $20-billion; however, only three blocks had been brought into production, even at a time of high international oil and gas prices.
The exit of mining major BHP Billiton from nine oil and gas blocks in 2013, citing regulatory hurdles, followed by Australia’s Santos from two blocks in eastern India was still preying on the minds of Indian policymakers and has resulted in the protracted process to get it right this time, the official added.