NELP-VI may yield $12 billion to govt

The government could rake in nearly $12 billion in revenue if oil or gas is discovered in the blocks auctioned under NELP-VI.

If crude oil prices are higher than $50 a barrel, the government could end up getting more than the $12 billion estimate since its share in profit petroleum has been calculated taking into account three scenarios for crude oil prices "� high, medium and low.

The assumption for high prices is of $50 a barrel, medium is of $40 a barrel and low prices is of $30 a barrel. Currently, the Indian basket of crude has fallen to $53-54.

As many as 55 blocks were offered under NELP-VI, with only three not receiving any bids. The government's share under the production-sharing contract can come either in the form of money or hydrocarbons. If there is no discovery, nothing would accrue to the government. 
 

TOP 6 BIDS IN TERMS OF GOVT'S PROFIT SHARE
Bidders	Profits for govt  (in $ mn)	Govt's share in NPV   (in %)
Focus-Newbury	837.38	78.76
RIL***	659.39	46.06
ONGC consortium**	588.48	47.53
RIL***	570.63	40.11
ONGC consortium **	566.04	48.81
ONGC consortium **	558.96	45.15
* NPV is Net Present Value (**, *** are bids by the same company/consortium for different blocks)

NELP-VI, unlike the previous rounds of NELP, gives more weightage to fiscal packages than technical capabilities and work programmes of the bidders. For example, for deep-water blocks, the fiscal package carried 60 points, while technical capability and the work programme carried 20 points each out of a total 100 points.

The highest returns to the government are scheduled to come from a shallow water block, CB-OSN-2004/1, in the Cambay basin, recommended to a consortium comprising Indian company Focus Energy and Cyprus-based Newbury Holdings.

The government is set to rake in $837.38 million over the four years of the work programme if oil or gas is struck. This is 78.76 per cent of the net present value of the profit petroleum from the block.

Another $659.39 million will come in from the deep-water KG-DWN-2004/5 block in the Krishna-Godavari basin, for which Reliance Industries is the top bidder.

However, the Directorate General of Hydrocarbons (DGH) has said that the fiscal packages for these two blocks offer a declining share of the profit petroleum to the government over the five years of the work programme, for Phase 1 of exploration.

The upstream regulator has recommended that fiscal packages offered for the blocks be re-negotiated to bring in sustained profits for the government.

In fact, the DGH has recommended re-negotiations on fiscal packages for 19 blocks under NELP-VI.