Interesting Facts about NELP VII

Regulations
The successful bidder would be required to enter into a Production Sharing Contract (PSC), which will be based on the Model Production Sharing Contract (MPSC). Some of the attractive features of the terms offered by the Government are:
The possibility of seismic option alone in the first phase of the exploration period.
Up to 100% participation by foreign companies.
No signature, discovery or production bonus.
No mandatory state participation.
No carried interest by National Oil Companies (NOCs).
Income Tax Holiday for seven years from start of commercial production.
No customs duty on imports required for petroleum operations.
Biddable cost recovery limit: Up to 100%.
Option to amortise exploration and drilling expenditures over a period of 10 years from first commercial production.
Sharing of profit petroleum with Government of India based on biddable pre-tax investment multiple achieved by the contractor.
Royalty for onland areas is payable at the rate of 12.5% for crude oil and 10% for natural gas. For shallow water offshore areas, royalty is payable at the rate of 10% for both crude oil and natural gas. For shallow water offshore areas, royalty is payable at the rate of 10% for both crude oil and natural gas. For deepwater offshore areas (beyond 400 m iso-bath) royalty is payable for both crude oil & natural gas at the rate of 5% for the first seven years of commercial production and thereafter at the rate of 10%.
Fiscal stability provision in the contract.
Freedom to the contractor for marketing of oil and gas in the domestic market.
Liberal provisions for assignment.
Arbitration and Conciliation Act, 1996, based on United Nations Commission on International Trade Law (UNCITRAL) model, applicable.
To facilitate investors, a Petroleum Tax Guide (PTG) is in place.
To enable bidders' focus, blocks have been categorized as Type- S in onland area and Type-A


Press Note by Ministry of Petroleum & Natural Gas on the occasion of launch of Seventh round of New Exploration Licensing Policy (NELP-VII) offering 57 blocks for exploration of oil and gas

Shri Murli Deora, Minister of Petroleum & Natural Gas launched the Seventh round of New Exploration Licensing Policy (NELP-VII) today at New Delhi. NELP-VII provides an attractive investment opportunity for companies to explore oil and gas in 57 blocks, which comprise 19 deepwater blocks, 9 shallow water blocks and 29 onland blocks. The 57 blocks cover a sedimentary area of about 1.71 Lakh sq. km. List of exploration blocks on offer is annexed.


2. NELP has boosted exploration efforts significantly in the country with increasing areas including deepwater coming under exploration. After six rounds, the area under exploration has increased four times to 44% of Indian Sedimentary Basinal area from 11% before implementing NELP. Hydrocarbon reserves accretion has already been more than 600 Million Metric Tonne of oil equivalent. As the exploration work progresses in NELP blocks, new oil and gas discoveries are pouring in. Under NELP, 49 oil and gas discoveries have already been made in 15 exploration blocks (5 blocks in NELP I, four blocks each in NELP II and NELP III, and two in NELP IV).

3. In order to address the concerns expressed by E&P companies in NELP-VII and based on the experience gained in previous rounds, the Government undertook extensive consultations with various stakeholders including E&P companies, industry bodies such as CII and Petrofed. The views of various stakeholders have been factored in, while preparing bid documents for NELP-VII.

4. The following are the highlights of NELP-VII:

i) Blocks have been divided into three categories - Type-A, Type-B, Type-S on the basis of geological perceptions, size of the blocks and tailor made bid evaluation criteria framed accordingly.
ii) For onland and shallow water blocks (Type-A & Type-B), technical capability is the qualifying criterion. In case of Type-S onland blocks, bid evaluation will be made on work programme and fiscal package parameters only.
iii) In order to attract multiple and experienced players in deepwater, the concept of consortium under the heading of technical capability for deepwater blocks only is introduced, where experienced companies in deepwater exploration being operator of the block and bidding for NELP deepwater blocks along with other Indian companies will be benefited with an additional 10 points.
iv) Mandatory 2D seismic is only for 23 exploration blocks, out of 57 blocks.

5. A special website on NELP-VII containing a large set of information including online data has been prepared and is being hosted for NELP-VII. Connectivity is also being provided through the website of the Ministry of Petroleum & Natural Gas and Directorate General of Hydrocarbons. The NELP-VII details can be seen at the following web sites:

http://www.indianelpvii.com/
http://www.petroleum.nic.in/
http://www.dghindia.org/

6. Promotional road shows for NELP-VII are planned at Mumbai (8th January, 2008), London (24th -25th January, 2008), Houston (28th -29th January, 2008), Calgary (31st January-1st February, 2008), Singapore (11th February, 2008), Perth (14th -15th February, 2008). During the road shows, presentations will be made on the emerging geological prospectivity of Indian basins as well as the contractual and fiscal framework. Successful operating companies in India and financial consultants will also share their experience of the working / investment environment in the country. The road shows will also cover one-on-one meeting with E&P companies / investors. The objective of the road shows is to showcase India’s discoveries and increase awareness about the policy framework as well as to promote India as an attractive investment destination. These focused efforts are aimed at encouraging the companies to visit data rooms and participate in the NELP-VII bidding process.


7. All geo-scientific data will be made available online through the internet to enable companies to view data at their own convenience and location. Work stations will be provided at Data Centres at Delhi, London, Houston, Perth and Calgary. The work stations will be equipped with software for enabling companies to analyze and interpret the data at the data centre itself expeditiously. The Data Centres will also provide on the spot clarifications. Details of all operational blocks from earlier rounds such as work programme, fiscal terms, etc., will be available at Data Centres. This will enable companies to assess existing work programme as well as other bidding parameters while formulating their own bids and may also help them in forming strategic alliances.

8. In order to provide sufficient time to interested companies in view of the larger number of blocks and to review and buy data, finalize strategic alliances, etc., companies / investors have been provided a larger time frame and the bid closing date for NELP-VII will be 11th April, 2008. Thereafter, the Government will evaluate the bids, make awards, finalize and sign the Production Sharing Contracts within 4 months.

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Bid Evaluation Process
BID EVALUATION
The following main parameters will be considered while evaluating the bids [for detailed Bid Evaluation Criteria (BEC), please see Appendix-I to V of NIO]:
i)
Technical capability of the proposed Operator:
(a)
For the onland blocks under Type-S, only work programme & fiscal package will be considered for bid evaluation. Technical capability will neither be a pre-qualification criterion nor a bid evaluation criterion.
(b)
For the onland and shallow water blocks of Type-A and Type- B, technical capability will be a pre-qualification criterion. Bidder has to score non-zero on one out of the three subcriteria of technical capability apart from non-zero score on operatorship experience.
(c)
For deepwater blocks Technical capability will be an evaluation criterion.
ii)
Financial capability of the bidding company/consortium:
(a)
The networth of the bidding companies should be equal or more than its participating interest value of the work programme commitment including biddable work programme and mandatory work programme for exploration phase-I.
(b)
The annual report including the audited annual accounts for the latest completed year and a Certificate of networth from company's statutory auditor(s) based on the latest audited annual accounts certifying the networth of the bidding company should be submitted. The networth will be calculated in accordance with the method given in the "FORMAT FOR SUBMISSION OF BIDS FOR EXPLORATION OF OIL AND NATURAL GAS IN BLOCKS OFFERED UNDER NEW EXPLORATION LICENSING POLICY". In case the parent company provides financial and erformance guarantee, the annual report, annual accounts and networth certificate in respect of parent company should be submitted.
(c )
In case a bidding company either bidding alone or as member of a consortium happens to be the first ranked bidder for two or more blocks, the networth of the company must be equal or more for aggregate value of the work programme commitment including biddable work programme and mandatory work programme for exploration phase-I in all such blocks.

In case, the company's networth is less than the value of minimum work programme commitment for such blocks, the bids will be considered in order of priority given by that company in their bid for respective blocks.
(d)
In case a bidding company or each of the company constituting consortium does not furnish the above documents, the bid shall be summarily rejected. In case, financial and performance guarantee of a parent company is provided, the financial capability of the parent company shall be considered for evaluating the financial capability of a biding company.
iii) Work programme:

Profit petroleum share offered to Government of India (GOI) by the bidder at the lowest tranche (less than or equal to 1.500) and the highest tranche (3.500 and above) of Pre-Tax Investment Multiple (PTIM) along with offered annual cost recovery limit will be taken into account for evaluation of Fiscal Package. Profit Petroleum share to GOI corresponding to PTIM between the lowest and the highest tranches indicated above, will be interpolated on a linear scale with a positive slope depending upon the exact PTIM achieved in each of the preceding year.
iv) Fiscal Package:

Profit petroleum share offered to Government of India (GOI) by the bidder at the lowest tranche (less than or equal to 1.500) and the highest tranche (3.500 and above) of Pre-Tax Investment Multiple (PTIM) along with offered annual cost recovery limit will be taken into account for evaluation of Fiscal Package. Profit Petroleum share to GOI corresponding to PTIM between the lowest and the highest tranches indicated above, will be interpolated on a linear scale with a positive slope depending upon the exact PTIM achieved in each of the preceding year.
v) Evaluation of bids and rejection criteria
a)
The designated operator for Type-A and B onland and offshore blocks would be required to obtain non-zero score on one out of the three sub-criteria of technical capability apart from non-zero score on operatorship experience.
b)
Bidders would be required to confirm to carryout the Mandatory Work Programme given against the blocks in this NIO during Phase-I (Please refer the table at page 7 & 8 ). A bid not confirming to carrying out the Mandatory Work Programme during Phase-I as prescribed in the NIO, shall be liable to be rejected.
c)
The bidders shall be required to commit atleast one exploratory well in Exploration Phase- II. A bid not committing a minimum of one exploratory well in Exploration Phase-II shall be liable for rejection.
d)
Bids not submitted in "Format for Submission of Bids" covering all the information/details listed therein are liable to be rejected.
e)
Any assumptions / deviations in a bid which are inconsistent or not complying with the contract terms listed in the brochure "Notice Inviting Offer for Exploration of Oil and Natural Gas under New Exploration Licensing Policy-seventh Round (NELP-VII)" may render the bid liable for rejection.
f)
Government at its sole discretion reserves the right to accept or reject any or all of the bids received without assigning any reason, whatsoever.
g)
For a bid to be valid, bidding company or consortium, as the case may be, is required pay Tender Fees by way of purchase of the requisite Data Package of the block to be bid on or before bid closing date. For the deep water block KK-DWN-2005/1 (Earlier block KKDWN-2002/1 under NELP-IV round and KK-DWN-2004/2 under NELP-VI round), KKDWN-2005/2 (Earlier block KK-DWN-2004/3 under NELP-VI round) and AN-DWN-2005/1 (Earlier block AN-DWN-2004/1 under NELP-VI round), the company (ies), which had purchased Data Packages in the earlier relevant NELP rounds is/are not required to pay Tender Fees by way of re-purchase of the Data Package.
h)
Company(ies) would be ineligible to bid as operator for the block(s) which was/were relinquished by it/them without completing the Minimum Work Programme (MWP) under NELP regime as operator. However, such company(ies) can be member of consortium with another company as operator.