THE NEW EXPLORATION LICENSING POLICY (NELP)

The New Exploration Licensing Policy (NELP) was launched by the Government for accelerating the pace
of hydrocarbon exploration in the country. So far two rounds of NELP have been announced. In order to
operationalise the NELP-I, consultations were held with the State Governments on NELP terms and their
concurrence was sought before offering any block in their respective States. Based on the concurrence
received from the State Governments, the Centre invited bids under NELP-I in January 1999 and a total
of 48 blocks (10 onshore + 26 shallow water offshore + 12 deepwater offshore blocks) were put on offer.
The 45 bids received on August 18, 1999 for 27 blocks were evaluated, production-sharing contracts
(PSCs) concluded and signed for 22 blocks in about 7 ½ months time on February 14, 2000. In India, for
the first time the PSCs have been signed in such a short time after the bid closing date. Production
sharing contracts for two more blocks were subsequently signed on October 3, 2000 and February 8,
2001. The total sedimentary area covering these 24 NELP-I blocks is about 0.232 million sq.km. This is
the first instance in the country’s hydrocarbon exploration history that deep-water acreages were
offered for competitive bidding. The NELP – I demonstrated the positive response by NOC sand medium
to small private companies, both Indian and foreign.

Implementation of works in the NELP-I blocks has begun in right earnest immediately after issuance of
the petroleum exploration license. The tempo of works in some of these blocks has already set a unique
record in the exploration activity in the country as 7 seismic ships were working at a time in the offshore
blocks awarded by the government of India. Never before more than two seismic ships had operated in
the country simultaneously. In addition to the seismic campaigns undertaken in the NELP blocks,
exploratory drilling activities, which usually takes upto 2 years after completion of seismic surveys, have
also been carried out in one of the offshore blocks. Encouragingly enough, results of these initial
exploratory efforts have already led to the discovery of a "gas strike" in offshore deepwater areas of the
Krishna-Godavari (KG) basin. While this discovery in the KG deepwater area, Annapurna, is yet to be fully
assessed, efforts would be continued in future to properly develop and make the discovery productive.
All these efforts reflects the great boost received so far in the exploration activities of the country
through the NELP route.

With the favourable "industry-response" in NELP-I, the Government of India announced NELP-II in
December 2000 offering 25 exploration blocks spreading over 11 basins and covering 9 onland blocks, 8
shallow water offshore blocks (upto 400 metre bathymetry) and 8 deepwater blocks (beyond 400 metre
bathymetry). The Government has since improved upon NELP-I and introduced certain new aspects in
NELP-II like making the information or data package available in CD ROMs, bringing in more
transparency in bidding process by making public the broad parameters for bid evaluation, introducing
few modifications in the model production sharing contract and creating a special interactive web site
for promotion the Nelp-II Blocks. The promotional programme of the NELP blocks organized through
road shows in Delhi and different international venues was also aimed. They achieved the objective of
sensitizing the investors and the technology providers about the availability of the potentials of the
blocks and the market. The NELP-II offer has received encouraging response as bids for 23 of the 25
blocks offered were received on March 31,2001. Production Sharing Contracts of these 23 blocks were
signed in a record time of about three and a half months on July 17, 2001.
Two more rounds of NELP may possibly be announced by the Government with each round consisting
of 20 to 30 blocks. Of these two expected rounds, the first would in all probability be floated before
March 2002. The work programme of both these rounds for Phase-I & II is likely to be implemented
during the X Plan period. Thereafter, the available acreages would be considered for offer under a new
open acreage system in which the exploration blocks would be on offer for bidding on a round-the-year
basis.

NELP IX

Welcome to this dedicated website prepared for promoting India's ninth bid round under the New
Exploration Licensing Policy (NELP-IX). The Government of India is offering 34 exploration blocks in 10
sedimentary basins covering an area of about 88,807 Sq. Kms. There are 19 onland blocks (out of which
8 type S blocks in most prolific producing basins), 8 Deep water and 7 Shallow water blocks. Under the
current offer, an area of 58,336 Sq. Km (65.69%) covering 19 new blocks is being offered for the first
time. In the remaining 15 blocks on offer, newly acquired data based on new concepts for hydrocarbon
exploration and Frontier areas is available.

The NELP-IX licensing round has been put on offer against a backdrop of many successful exploration
and hydrocarbon discoveries. Under NELP regime, 87 oil and gas discoveries have already been made in
26 exploration blocks till NELP-VIII.

The views of various stakeholders were taken into account while finalizing the bid documents for NELP-
IX as a result of which some improvements and simplification in the bid evaluation criteria and Model
Production Sharing Contract have been done. The details can be seen in this website as well as at
www.petroleum.nic.in and www.dghindia.org.

The bid closing date for NELP-IX is 18th March, 2011. Roadshows/Investors' Meet will be held and data
rooms will be opened at global oil and gas locations. I look forward to your participation in a big way. I
invite all small, medium and big E&P companies as well as investor companies to participate in the ninth
round of NELP to become partners in our efforts to enhance energy security of India and be a part of the
growth momentum in the E&P Sector.

About NELP IX

Background

New Exploration Licensing Policy (NELP) was formulated by the Government of India in 1997-98 to
provide a level playing field, on which all parties would compete, for the award of exploration acreage.
Another directive for NELP is that all bid rounds and the award of blocks are to be conducted in an open
and transparent manner.

Prior to establishing NELP, 11% of Indian sedimentary basins area was under exploration. With the
conclusion of eight rounds of NELP, the unexplored sedimentary area has been reduced to just 12%.
Blocks on offer under NELP IX

A number of exploration blocks are on offer for bidding in the NELP-IX Licensing Round, totalling a
number of 34 blocks. The blocks are categorised as follows:

8 are in deep water

7 are in shallow water

19 are onshore

View Details Of Blocks On Offer

click to view.

11 Blocks are located off the western coast, four being in deep water. A further four deep water blocks
are available to the east of the Andaman & Nicobar Islands. The remainder of the blocks are located
onshore.

Main Features of Terms Offered

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:

There will be only one Exploration phase of 7 years for Onland and Shallow water blocks and 8 years for
Deep water blocks and Frontier Area blocks. There will be no compulsory relinquishment after Initial
Exploration Period (when mandatory and committed programme are to be completed) and operators
will have option to relinquish entire area after completion of Minimum Work Programme or retain the
Block by committing to carry out drilling of one well per year in case of Onland and Shallow water Blocks
or one well in 3 years in case of Deepwater Blocks. In any case, the entire area (leaving aside the
Discovery Area and Development Area) would require to be relinquished at the end of 7 or 8 years of
exploration, as the case may be.

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).

No customs duty on imports required for petroleum operations.

Income Tax Holiday for seven years from start of commercial production of "Mineral Oil".

Biddable cost recovery limit: Up to 100%.

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
where as 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.

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) compiled in 1999 is provided.

Predetermined Liquidated Damages (LD) specified for unfinished Minimum Work Programme.

One time Bank Guarantee (BG) at a lower rate for the total committed work programme.

A nominal bid bond at specified rate to encourage serious bidders.

Bid Evaluation Criteria

Bid Evaluation is based on Technical Capability, Work Programme and Fiscal Package for each block type
as shown in the table below:

Block Type Technical Capability Work Programme Fiscal Package

Onland Type S N/A 50% 50%

Onland and Shallow Water Pre-qualification criterion 50% 50%

Deep Water 25% 25% 50%