National Exploration License Policy

The dismantling of the APM was followed by National Exploration License Policy 1997, which became effective in February, 1999. Since then licenses for exploration are being awarded only through a competitive bidding system and National Oil Companies (NOCs) are required to compete on an equal footing with Indian and foreign companies to secure Petroleum Exploration Licenses (PELs).

Salient Features of New Exploration Licensing Policy (NELP)

The main features of NELP are :

• Private participation for Intensive exploration of Indian basins.
• Provide avenue for opening up of acreages in ultra deep water & frontier areas.
• To bring-in new & state of art technology in exploration & exploitation.
• Level playing field to all participating companies.
• Transparent Bid Evaluation system.

This was started with a view to make India a great investment destination for exploration. Under the NELP, the government actively promotes the exploration of hydrocarbon blocks. So far 9 rounds of NELP have been successfully carried out. Under these nine rounds more than 300 blocks have been given out for exploration with an investment of around $20 billion.

Currently, Modi Government is planning to launch the 10th round of auctions of oil and gas exploration blocks under the New Exploration Licensing Policy (NELP) in the next 6-12 months. The NELP-X round would be held with a revenue-sharing model, wherein a bidder has to quote the amount of oil or gas output it is willing to offer to the government from the first day of production; whereas in the existing system of production sharing contract (PSC), the contractors are allowed to recover the entire cost of exploration and production before sharing the profit with the government. However, many explorers have opposed the revenue-sharing model, citing higher risk, particularly for deep and ultra-deep water blocks.

The Government was also willing to review the current NELP terms as it was in news in 2010 that Government would move to Open Acreage License Policy (OALP). In order to offer blocks under OALP, however, a national data repository (NDR) is required. Directorate General of Hydrocarbons (DGH) has appointed HLS Asia (HLSA) to set up the NDR by 2016-17.Open acreage will enable bidders to bid for blocks on offer at any time of the year. The data for these blocks would be made available to the bidders through the NDR. Pakistan is using such system. The NDR will play a much larger and significant role in the exploration and production scenario in the coming years.

Critical Evaluation of NELP

There is no doubt that NELP policy has been successful in giving the oil and gas sector a thrust. It resulted in discoveries such as Cairn India’s Barmer fields and RIL’s KG-D6 block. However, 15 years down the line the fact that only six blocks have started production also suggests its implementation failures. Nonetheless before the implementation of NELP, barely 11% of India’s sedimentary basins area was under exploration. But to achieve the target of 80% more transparency is required in its implementation.