The Hindu Business Line : NELP-7: Changes likely in bid evaluation norms

Block view
Ministry to launch new licensing round next month.
To offer 80-85 blocks, both onshore and deepwater.
Change proposed in definition of hydrocarbon discovery as well.

Richa Mishra

New Delhi, Oct. 15 The forthcoming oil and gas exploration licensing round could see some changes in the bid evaluation criteria and the model production sharing contract (MPSC).

While proposing changes in the fiscal package criteria for the prospective bidders and definition of hydrocarbon discovery, the Petroleum & Natural Gas Ministry is also likely to suggest a new-sub criterion of ‘consortium/partnership’ for deepwater blocks.

Learning from its previous New Exploration Licensing Policy (NELP) round and after due deliberations with the companies, the Ministry has proposed these changes, official sources told Business Line.

The Ministry plans to launch the latest licensing round next month, offering about 80-85 blocks both onshore and deepwater. A meeting of empowered committee of secretaries (ECS) has already considered these changes and approved with certain modifications.

On proposal

The proposed modification in the fiscal package is to ensure that the Government’s share of profit petroleum remains unaffected during the period of production. As per the proposal, when bids are put in, the Government’s share of profit petroleum would be calculated against two tranches of pre-fixed formula as opposed to the six tranches mechanism adopted in the previous round.

This would also help to avoid situations of ‘extreme financial packages’ that showed a higher share for the Government in the initial years of production and a lower share for the later years of production.

Under the proposal, while the minimum and maximum share for the Government would be calculated as per the pre-fixed formula of revenue coming out of the amount of investment made in the block, the remaining shares of profit petroleum falling between the prescribed range are proposed to be worked out on a pro rata basis.

Thus, profit share would be lower at the lower end of investment and higher at the higher end. The Government share of profit petroleum is to be calculated as a ratio of net revenue accruing out of the investment made.

What is ‘discovery’

The definition of hydrocarbons ‘discovery’ is also being proposed to be changed in the MPSC, which would allow companies to adopt modern day methods of testing the hydrocarbons flow.

Under the present MPSC, a discovery means only those finds that have not previously existed and can be recovered at the surface in a flow measurable by conventional testing methods. It is now being proposed to do away with the term ‘conventional’ and replace it by ‘flow measurable by petroleum industry testing method’.

For deepwater blocks, a new sub-criterion of ‘consortium/partnership’ within the technical capability criteria by assigning 10 points each for consortia of Indian and foreign companies bidding together has been proposed.

The points would be awarded provided at least one of the companies acting as the operator has experience of deepwater production beyond a prescribed limit. This move is expected to encourage more partnerships, sources said.

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