Going by the tremendous response that it has generated — 165 bids for 52 blocks, which is an average of three for every one on offer — it would be tempting to label the sixth round of bidding under the New Exploration Licensing Policy (NELP-VI) a grand success.Aggressive promotion, a transparent policy and success in the Krishna Godavari Basin and Rajasthan have played a vital role in attracting 165 bids for the sixth round of the New Exploration Licensing Policy (NELP), which offers 55 exploration & production blocks.Global energy giants British Petroleum, British Gas, Italy’s ENI, Petronas and French multinational TOTAL, apart from domestic players, were among the bidders for oil and gas exploration rights in the country’s largest ever licensing round covering an area of 3.52 lakh sq km, bids have closed.

Three blocks, however, did not receive any bids."We received 165 bids at the close today. This is the highest ever received for 52 blocks under NELP VI. In all, 66 companies - 35 foreign and 31 Indian - bid either on their own or as consortia. Among the foreign companies, about 20 were new ones," said Mr V.K. Sibal, Director-General of Hydrocarbons (DGH). While 39 blocks attracted multiple bids, 13 received single bids. During this round, 310 data packages amounting to Rs 78.60 crore were sold, against the previous best sale of Rs 22.75 crore during NELP-V."The response is very good. We offered the highest ever acreage in this round. India has political stability and there is transparency in our system. The highest number of bids, the large number of companies participating tells the success story of India’s hydrocarbon sector," said Mr Sibal. He added that going by conservative estimates of 20-25 per cent success ratio in the blocks, expected investment could be $8-10 billion in all the three exploration phases.

rude and is keen to quickly tap any remaining domestic reservoirs to help offset its growing dependence on imports."Non-availability of data on ultra deepwater blocks was one of the major impediment for lack of interest by global players like Chevron, Exxon and Shell," Sibal said. Most of India’s oil comes from oilfields discovered three decades ago. It has been put back on the hydrocarbon map thanks to several major recent finds and an improved bidding system.hile it still lags oil hot spots like Libya, India is keen to draw in private capital and global oil companies are attracted by its vast unexplored territory. Of the total 35 foreign firms, 20 participated in the auction for the first time. These include NaftoGaz of Ukraine, Australia’s Santos, and Tap Oil Ltd., France’s Total and and Texas-based EOG Resources.

Total hydrocarbon resources, including those in deep water, are estimated at about 28 billion tons of oil equivalent. On April 1, 2005, initial in-place was "booked" at 8.24 billion tons with 3.16 billion tons recoverable reserves. As it consumes about 3% of the global oil and gas produced, India needs to increase hydrocarbon exploration. More than 81% of the total potential within the country is still to be explored. Between 2000 and 2004, an average of four oil and gas discoveries were reported annually. However, last year 15 finds were reported.The country’s total gas reserves have increased by more than 60% in the past four years.A number of hydrocarbon discoveries have been made in the Krishna-Godavari basin, offshore in the Bay of Bengal, and onshore in Rajasthan.Reliance has also discovered 3.7 trillion cubic feet of gas below the coal seams in the coal-bed methane (CBM) blocks offered to it in the earlier rounds, while ONGC has established 1.4 trillion cubic feet of CBM reserves.One of the biggest and most significant discoveries took place on June 17, 2005, when the Gujarat State Petroleum Corp (GSPC) struck gas in the KG Block off the coast of Andhra Pradesh.

The well has an estimated reserve of 20 trillion cubic feet, which makes it the largest gas reserve in India, estimated to be worth Rs2 trillion. Officials are checking the data to confirm the reserve estimates. The GSPC and a partner - to be identified soon - plan to invest Rs20 billion more to develop the Krishna-Godavari block.India’s current gas reserves of 82 trillion cubic feet are insufficient to meet soaring demand for fuel from power stations, as well as buses and taxis that have converted to natural gas in India’s cities.ONGC bid for the maximum number of 45 blocks, mainly as a consortium.Reliance Industries Ltd (RIL) went solo to bid for 20 blocks, and in partnership with Oil India Ltd (OIL) for one block. Reliance Natural Resources Ltd tied up with Naftogaz of Ukraine and PGNIG of Poland for 12 blocks. Mr Anil Razdan, Additional Secretary in the Ministry, said that the evaluation of the bids would be undertaken; the blocks are likely to be awarded by November 15 and contracts expected to be signed by January 2007.

Other companies which bid include Essar, HPCL, BPCL, OIL, Cairn Energy, Assam Co Ltd, Adani Port Infrastructure Ltd, Beach Petroleum, Canoro Resources of Canada, EOG Resources, Geoglobal Resources, Indian Oil Corp, Jubilant Oil and Gas, Joshi Technology, M3nergy Berhad, Pan Orient, Petrogas, Prize Petroleum, Premier Oil of the UK, Santos International, Tap Oil, Valdel Oil and Gas Pvt Ltd and Zakros Holdings Ltd.The 25 onland blocks offered are in AP, Bihar, Arunachal Pradesh, Assam, Gujarat, Madhya Pradesh, Maharashtra, Mizoram, Rajasthan, Tamil Nadu and Uttar Pradesh. Of the 24 deep-sea blocks, 20 are off the east coast, three off the west coast and one lies in Andaman offshore.Four of the shallow water blocks are in the western offshore and the remaining two off the east coast.

Hydrocarbon sector investment advisory firm Global Union Energy Ventures announced its entry into India and said it aims to finance at least three major projects every year in the range of 500 million to 5 billion dollars."We are talking to all the major players in the downstream and midstream sectors in India and hope to do at least three major projects on an annual basis," Global Union Energy Ventures Chairman Jeffrey Waterous said.He said the company was looking to finance projects in the range of 500 million-5 billion dollars in India for which it was in talks with both private as well as state-owned

firms.Waterous, however, refused to divulge any details about the India companies the firm is talking to.The firm plans to largely focus on supporting refineries, petrochemical complexes and gas facilities for the growing energy requirement of India, including LNG (Liquefied Natural Gas), domestic pipeline facilities and port rehabilitations.The company is part financing the Nagarjuna Oil Corp’s refinery project in Cuddalore, being built at a cost of 1.1 billion dollars on the east coast.The mothballed refinery project will have a capacity of 1,25,000 barrels a day. "We are acting as a financial advisor to this project," Waterous said.Talking about the company’s future plans for India, he said, "For us India is undeniably a vital player in the global energy industry with limitless opportunities," he said.

There are some significant points need to be looked at. First, govt. must put in place regulators for the upstream and downstream sectors of the oil industry, second, more than half the bids have come from Indian companies, 45 of them from Oil and Natural Gas Corporation (ONGC). Third, none of the Big Oil members — ExxonMobil, ChevronTexaco, Royal Dutch/Shell and ConocoPhillips — has thought it worth its while to bid, either on its own or jointly with Indian companies, for what was arguably the largest number of exploratory blocks on offer in recent times anywhere in the world.And this, coming at a time when oil prices are high and the oil biggies are investing big bucks in exploring in frontier areas, is surprising indeed. As the activity increases in future, the need will be felt all the more for a calming regulatory hand. Lastly, the Government has to gradually clear up the mess in the industry in terms of subsidies and under-recovery sharing and make the oil sector market driven.

It is indeed futile to expect multinational oil companies, which have opportunities elsewhere, to invest in a country where they cannot be sure of a proper return on their investment.Bidding patterns, even in this round, did not miss surprising the stakeholders. If media reports are to be believed, the outcome of NELP-VI is expected to raise a furious debate on the fundamentals of the government’s licensing policy. The National Oil Companies (NOCs) have done well in leveraging upon their ability to accept lower than industry average rate of returns to gain access and control over hydrocarbon reserves.Prominent domestic and international private oil companies responded well by bidding for majority of the blocks. They are, however, disappointed since, expectedly, they could not match the aggression of NOCs to maximise the ‘government’s take’. In sum, the use of evaluation criteria by bidders, sometimes at the cost of commercial and technical rationale, to win the blocks is strongly reflected in the excessive work programme committed by few, very low ‘profit share’ proposed by bidders for higher brackets of investment multiples, and lower work programmes than the NELP-V bid by almost all bidders in NELP-VI, owing to lower weightage this time round.

The exploration license for the blocks had expired. This does not seem to have worked, as Chevron, Shell and ExxonMobil purchased data packages but chose not to bid. Some of their fears might be justified, as it is the domestic majors that have submitted the largest number of bids - ONGC bid for 45 blocks; private-sector biggie RIL bid solo for 21 blocks; Essar Oil put in the third-highest bids with interest in 15 blocks; and Oil India Ltd (OIL) bid twice on some blocks, seeking a stake in as many as 38.Initial reactions by experts suggest that government-owned oil companies will walk away with the largest chunk of the prospecting licenses. ONGC could bag 18-24 blocks, OIL seven to 10, RIL five or six, and Essar Oil two or three blocks. Overseas companies are likely to land only a few of the smaller blocks.

Yet on the positive side, as many as 35 foreign companies made offers for NELP-VI blocks this year, either as independents or as consortiums, and 31 Indian companies were involved. This is the first time foreign companies have outnumbered Indian ones. Many of these firms are struggling to gain access to promising parts of Latin America, the Middle East and Russia.From the limited perspective of successful completion and good response to the bidding round, the government has come out with flying colours in NELP VI. The point of debate, however, is on the objective set by it for laying down strategies and policies for upstream sector development and, therefore, the licensing policy. Though India’s Production Sharing Contract terms are rated as one of the better ones in the world, the award criteria has undergone changes, albeit well intended, in every round. For example, while NELP-V compelled the government to reduce work programme weightage, it would be reasonable to expect a demand from industry this time to fix a suitable cap on ‘profit share’ by NOCs.

Resultantly, the changes have indicated varying objectives. The higher weightages for work programme indicate the intent of attracting more exploration investments. The higher ‘profit share’ weightage indicates the intent to maximise returns from the sector, whereas the pre-bid roadshows appear to indicate that investment in exploration and development from across the border is necessary for India’s upstream sector development. Achieving all these objectives in one go may be difficult.Notably, in NELP-V, and probably the results of NELP-VI would tell that, the investment by foreign oil companies was forthcoming but got locked in the realm of policy, as expressed in the form of the evaluation criteria. One would not be out of place to question if we ever need any inward investments for meeting our exploration requirements. If the work commitments given in NELP-V are any indication of average investment needed per square km, exploration of balance area would need around $25-40 billion.

Indian NOCs and private sector are financially strong and would be willing to pledge these volumes in the next 10 years if the prospective of Indian basins is to be as proven as in the Krishna-Godavari basin or Mumbai High, and if availability of ‘Big Oil’ windfall profits continue. Additional risk capital for the sector has also been offered by some construction, oilfield service, shipping, plastic manufacturing, steel and fire protection companies in India through NELP-VI bids.As the petroleum sector knows, the challenge is not availability of hydrocarbon resources but efficient development of those resources with minimum impact on the environment. The solution lies only in technological development. Therefore, despite availability of domestic capital, we will continue to need to partner with major oil companies or technology-strong global NOCs. Today, more and more companies are able to conduct their exploration and production far and wide.

As a result, they are competing fiercely for the best acreage. There exists an open market for exploration rights, which is good and bad news for countries like ours. The good news is that they can drive a harder bargain with oil companies over access to acreage. The bad news is that, all things considered, too hard a bargain will drive the companies away, to other countries. At end of NELP VI there is alreasons for the MOP&NG to feel satisfied for getting such a huge commitment for investment.