Govt awards 52 oil and gas blocks

CABINET DECIDES

In its largest-ever auction of oil and gas assets, the government today awarded 52 exploration blocks to domestic and overseas companies, overruling upstream regulator Directorate General of Hydrocarbons' objections on unfavourable financial terms in 19 of them.

The government also said that the next round of auction of another 70-80 blocks would be sealed by mid-April.

The winners are expected to invest over $6 billion in the initial five years from 2007 to 2012, Director General of Hydrocarbons VK Sibal told reporters.

Late last year, the Directorate General of Hydrocarbons had recommended renegotiation in the financial packages for 19 blocks, saying the government's profit share from discovered hydrocarbons in these blocks was sliding from a high of around 90 per cent in the first five years to as low as 1 per cent later.

An empowered committee of secretaries, however, had overruled the DGH's observations. The Cabinet Committee on Economic Affairs, which met here today, went ahead with the committee's recommendations.

Petroleum Secretary MS Srinivasan said the government preferred higher returns in the initial years of production to probable returns in later years. "Large discoveries are getting less common. Larger returns in later years of the contract period fall in the realm of probability," he said.

The production-sharing contracts will be signed between the winning bidders and the government in the first week of March. ONGC had been handed 25 blocks, while Reliance Industries had received 7. Of the 25 assets awarded to ONGC, the Indian firm will be the operator in 24, while Cairn Energy will run the remaining one, an offshore block.

Reliance Industries' seven deep-water blocks are in the gas-rich eastern offshore region, while Essar Oil landed two onland blocks in north-east India.