Nelp-VII auction to be delayed till November

The shortage of drilling rigs across the world is likely to delay the seventh round of auction of oil and gas blocks, under the New Exploration and Licensing Policy (Nelp), till October-November this year.

"Rig shortage has delayed the Nelp-VII auction. The Director General of Hydrocarbons (DGH) recently told the petroleum ministry that the situation would improve in a year and a half. We are thus aiming to launch the auction by October or November, in time to meet the new rigs expected to be commissioned in 2009," a senior official in the petroleum ministry said.

If the oil and gas blocks auction is launched in October, the blocks will be awarded by the middle of next year, which will give the companies winning blocks a year's time till the rig shortage situation is expected to ease, the oil ministry official said.

After the sixth round of Nelp was awarded in March this year, Petroleum Secretary MS Srinivasan had said Nelp-VII would be launched by mid-April.

However, the launch has been repeatedly delayed with the DGH VK Sibal saying in June this year that the launch would take place in August.

Sibal, the upstream regulator, had in March this year also said he had recommended extension of deadlines, for companies to drill exploratory wells in blocks awarded in the third round of auction, by at least two years because a shortage of rigs was delaying the drilling plans.

"What we have proposed is that the three-year exploration phase-I may be extended to five years by including two years of phase-II. Phase-II and III development and production phases can be combined," he had said.

Till the last round of Nelp, oil companies bid for blocks which included a minimum work programme for drilling. This work programme involved around three years for exploratory drilling and another 2-3 years for development drilling.

The DGH had proposed extending the deadline for phase-I for 43 blocks awarded in Nelp-III and IV rounds, most of which went to Reliance and ONGC. "Globally nearly 63 new rigs will be commissioned in 2009," said the oil ministry official.

"Most of these are likely to come to India and help operators meet work commitments," he added.

The government does not want to launch Nelp-VII with a huge backlog of drilling work from previous phases. However, the need for finding more oil and gas to meet demand will ensure that the next round of auction is launched soon, the official said.