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Energy Economics

NEW EXPLORATION LICENSING POLICY

(NELP)

Sandeep Prasad

E-MBA 10

Roll no:20104005

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Contents

Upstream Industry- India

PRE-NELP

NELP

Analysis of NELP

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Pre NELP

Liberalized economic policy adopted by Govt. of

India

Petroleum sector de-regulated and de-licensedPetroleum sector de-regulated and de-licensed

Formation of Directorate General of Hydrocarbonsin 1993

Small size producing fields offered to Pvt.Small size producing fields offered to Pvt.

Operators / JVsOperators / JVs

Acreages, both offshore and onshore, offered

through competitive bidding

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NELP

NELP formulated by the GOI, with DGH as a nodalagency, during 1997-98

NELP level playing field to both Public and Privatesector companies in E & P of hydrocarbons

Acreages are offered international competitivebidding

The terms and conditions of this open andtransparent policy rank amongst the most attractivein the world.

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Features of NELP

No custom duty on imports for Petroleum Operation

Income Tax holiday of 7 years

Sharing of Profit Petroleum with Govt. pre-tax

investment multiple

Low to moderate royalty rates between 5% to12.5%

Freedom to the contractor for marketing of oil & gasin domestic market.

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Comparison- Pre NELP & NELP

PRE-NELP NELP

NOCs get acreages onpreferential basis

NOCs to compete for acreages

NOCs had option to acquireupto 40% participating interestat their option.

There is no such provision

The government had right ofrefusal for the purchase of crudefrom contract area

The contractor may disposetheir crude in the domesticmarket

NOCs receive administered

prices

NOCs get international prices at

par with private companies

No cess/royalty - payable bycompanies;

Royalty to be bear by Company

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Bid Evaluation Criteria

Technical Capability Only for Deepwater Block

Work Programme

Fiscal Package

1. Acreage Holding

2. Operatorship Experience

3. Annual Production

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Cash Flows

Production value

Cost Petroleum

Profit Petroleum

Contractors share Governments share

Development

Exploration

Production

Income taxGovernments take

Contractors take

Royalty

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Government of India-Profit Petroleum

Source: Hydrocarbon E& P

activity 2009-10,DGH

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Government of India-Revenue

Source: Hydrocarbon E& Pactivity 2009-10,DGH

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Snap Shot

ROUND Year BlockOffered

Bid Received ContractSigned

NELP-I 1999 48 45 24

NELP-II 2000 25 44 23

NELP-III 2001 27 52 23

NELP-IV 2003 24 44 20

NELP-V 2005 20 69 20

NELP-VI 2006 55 165 52

NELP-VII 2008 57 181 41

NELP-VIII 2009 70 76 32

NELP-IX 2010 34 74

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Analysis of NELP

Production Sharing Contracts- Each block has different

requirements, issues, risks.

Government Regulation-Pricing and Marketing Terms

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