Response to small oil fields auction will be test for interest in NELP round

Nine months after the Cabinet cleared a policy to auction marginal or discovered small hydrocarbons

fields of ONGC and Oil India, the government is set to launch the first bidding rounds on May 25.

The features of the ‘Discovered Small Fields Bid Round’ are similar to the recently announced

Hydrocarbon Exploration Licensing Policy and could test investor interest in India’s latest contract model

for hydrocarbon exploration and production, an industry observer said.

The marginal fields were awarded to public sector oil companies on nomination basis prior to the

licensing rounds. These discoveries could not be monetised for many years for various reasons such as

isolated locations, small size of reserves, high development costs, and technological constraints.

Though major players in the business like Reliance Industries, Cairn India, besides the public sector

entities, have envisaged interest, the private players feel, that it would advantage ONGC and Oil India as

both have already had access to the data.

A total of 67 small fields, which earlier belonged to ONGC and Oil India, are to be offered in the

Discovered Small Fields Bid round with intention to unlock resources worth ₹70,000 crore (89 million

tonnes of oil and gas reserves) with estimated annual production of ₹3,500 crore.

The winners will be given a 20-year licence under the unified licence regime with marketing and pricing

freedom. “Given volatility in the oil and gas price and the cost of production involved, any decision can

be taken only after the data has been evaluated,” a private sector executive said. The 67 fields in the

Discovered Small Field Bid round have been clubbed into 46 contract areas across nine sedimentary

basins. The biggest discovery among the lot is the D-18 in Mumbai Offshore which has 14.78 million

tonne of in-place oil reserves. The field with the largest in-place natural gas reserves is the B-9 field in

the offshore Kutch basin with 14.67 billon cubic metres.

Revenue sharing

The bidders will be awarded the fields on a revenue sharing contract. The government’s share of

revenue in crude oil will be calculated on the basis of the Indian Crude Basket or actual selling price

whichever is higher. For natural gas, the minimum price for calculating the government’s revenue share

will be the prevailing domestic natural gas price.

While royalty rates will be the same as the New Exploration Licensing Policy, there will be no cess

applicable. The duration of the contracts will be 20 years and may be extended by 10 years upon mutual

agreement. Contractors will be free to undertake exploration activity for the duration of the contract

period.

NGS INDIA