9th NELP Auction takes place amid intense political & business debate

As companies from worldwide jockey for Indian energy at the New Exploration Licensing Policy (NELP) auction on March 28th, government & business leaders debate the present impasse in efforts to phase out NELP’s annual auctioning of pre-assigned oil & gas exploration blocks, and to move to a new Open Acreage Licensing System (OALP) that would allow energy firms to bid for blocks they want to drill, any time of the year.

Launched in 1999, the NELP’s highly-priced bidding processes have essentially resulted with only big players having bountiful capital, such as state-controlled companies & multinationals, winning. Unable to bid on their own, smaller or independent companies leave India to focus on other markets. Under the proposed OALP system, bidding prices would lower, as investors, not the government, would do the geological surveying on blocks of their choice.

New Minister of State for Petroleum and Natural Gas RPN Singh defends the current system, pointing out that this year’s auction “intentionally includes fields where the acreages are open to both big players and small.” For him, the OALP would have to wait until a National Data Repository, mapping out geological explorations of energy reserves, is set up.

Herein lies the stalemate. In view of India’s critical energy deficit, the industry is less concerned about when the repository is set up, but more about who would pay for geological work performed under the OALP. India lags considerably behind other international markets in that only an estimated 20% of basins have been explored. While open acreage would aid catch-up efforts, few companies would risk financing alone speculative geological surveying, without guaranteed return.

Leading figures in India’s oil and gas community suggest that the best way would be to get the government involved as a stakeholder, part financing the speculative work and thus having incentive to commercialize this data to companies later on. Until government and industry agree on a financing solution that keeps everyone happy, the OALP is likely to remain in limbo.

** Exclusive interviews with all personalities were recently conducted by Focus Reports & available on energy.focusreports.net, in anticipation of an Indian oil & gas special report due for publication in the Oil & Gas Financial Journal, later this year.

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This release was published on openPR.