India, the second most populous country in the world with a population of over 1 billion, has been growing at a sustained GDP growth rate of about 6% in the last decade. The country now targets a sustained average annual GDP growth rate of 7% to 8%. This has fuelled an increasing demand for energy. At present, India's per-capita primary energy consumption is about 310 Kg of oil equivalent against the global average of about 900 Kg, reflecting the country's large appetite for energy. Therefore, the priority response to our energy security need is to fully exploit, onshore and offshore, our prognosticated reserves of 30 billion tonnes of hydrocarbons. This can be done only in partnership with entrepreneurs around the world. The upstream hydrocarbon sector in India has been fully liberalized and globalized, opening many exciting new opportunities to investors in this burgeoning sector of the economy.

India's upstream sector is over 100 years old, with the first commercial oil discovery having been made in Assam in 1886. India is endowed with a sedimentary area of 1.21 sq miles (3.14 million sq km). Only 18% of the sedimentary area of India has so far been reasonably well explored, with geologically established reserves of about 55 billion bbl as against estimated reserves of 225 billion bbl. A humungous hidden potential remains to be explored.

To this end, a New Exploration Licensing Policy (NELP) was operationalized in 1999. NELP seeks to attract both foreign and domestic investors in exploration of oil and gas in the country. Even more remarkably, it has opened the deepwater and some frontier areas for the first time. The NELP provides some of the most attractive fiscal and contractual terms to investors anywhere in the world. Under NELP, a completely level playing field has been laid for all investors. Government-owned oil companies (national oil companies), private domestic companies and foreign companies compete on equal terms to acquire exploration acreages on an equal footing. Collaborations and partnerships aimed at bridging the public/private and domestic/international divide are encouraged. The fiscal terms provide for biddable profit petroleum sharing, 100% cost recovery (covering even royalty payments), 100% foreign participation, complete freedom to market oil and gas at market-related prices within India, no import duties for items imported for petroleum operations, no bonuses and a 7-year income tax holiday. Companies can adjust their risk-rewards for a particular block in terms of the work program commitment and profit sharing with the government. The fiscal regime offered by the government allows companies to recover their cost up front and provides a progressive regime by which the government and contractor share equitably as the profitability of a project goes up along the project life curve.

The government of India have already signed 90 contracts under the first four rounds of NELP between 1999-2004 with an estimated investment in exploration of about US$ 4 billion. The exploration program carried out so far has resulted in 21 oil & gas discoveries. In the last 2 to 3 years, giant gas discoveries have been made by the consortium of Reliance Industries Limited (a private sector Indian company) and Niko Resources Limited (an independent Canadian company) with estimated gas reserves of about 14 Tcf. Cairn Energy (a Scotland-based independent company) has made large oil discoveries in Rajasthan (in the Western part of India), where in-place oil reserves are estimated to be 1.l billion bbl.

A total of 20 blocks - six deepwater, two shallowwater and 12 on-land blocks are on offer under NELP-V with the last date of bid submission being May 31, 2005. Details are available on the following Web sites: www.indigopool.com, www.petroleum.nic.in and www.dghindia.org.

The fifth round provides several new features. The entire data is now available on line, special data centers have been set up at New Delhi, London, Dubai, Houston, Calgary and Moscow with fully equipped work stations and data interpretation software. All the weightages used in the bid evaluation have been made fully public to provide complete transparency in bid evaluation and the award of blocks.

The fifth round of NELP launched in the backdrop of recent major oil & gas discoveries made in India's offshore and on-land basins provides an excellent opportunity to companies to enter the oil and gas sector in India.

Mani Shankar Aiyar is the minister for the Petroleum & Natural Gas Department, Government of India

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