Samudra Manthan: DGH to open monthly windows for deepwater oil & gas blocks under special OALP

New Delhi: Companies seeking deepwater and ultra-deepwater oil and gas blocks in India will be able to file expressions of interest (EoIs) every month under a special round of the Open Acreage Licensing Policy (OALP), the Directorate General of Hydrocarbons (DGH) said on Monday. A 21-day EoI window will open on the first of every month, giving bidders 12 windows a year, according to a DGH advance notice to prospective bidders. Bids for these blocks will be judged on the committed work programme alone, with no revenue-share quote.

Follow The PSUWatch Channel on Whatsapp

The new bid round is being introduced under the Centre's ambitious, Rs 84,084-crore scheme to expand domestic oil and gas production — Samudra Manthan.

The existing OALP modalities provided for three EoI windows a year, running from August 1 to November 30, December 1 to March 31 and April 1 to July 31. But under the special round, each monthly window will run its own evaluation, bidding and award in parallel, the notice said. As a result, “bidders need not wait for a single annual round.”

Work programme replaces revenue-share bids

Bidders will now compete on the work they commit to. The originator of a block will get 10 marks, the notice said, and another 10 marks will go to bidders with demonstrated deepwater or ultra-deepwater drilling experience.

The change matters most for Category-I basins. DGH defines these as basins with proven hydrocarbon resources and established commercial production. Until now, Category-I bidders quoted a share of revenue for the government, and that quote carried 30 of 100 marks, according to the existing modalities. The work programme carried 65 marks and the originator five. Bids for Category-II and III basins, which have no established commercial production, were already evaluated on the work programme alone, with 10 marks for the originator. The existing modalities gave no marks for drilling experience. They required an operator to show one year of operatorship experience.

Windfall-only revenue share for five years

The way revenue is shared will also change for Category-I deepwater and ultra-deepwater blocks. For the first five years from production, revenue will be shared with the government only when a windfall gain accrues, the notice said. From the sixth year, the government will take the higher of 5 percent of revenue or the windfall gain slab.

The regular modalities defined a windfall gain as revenue from a contract area of more than USD 2.5 billion in a financial year. Below that level, nothing is payable. Above it, the government takes 10 percent of revenue between USD 2.5 billion and USD 5 billion, according to the slabs in the modalities. The rate rises to 30 percent on revenue between USD 5 billion and USD 10 billion, and to 50 percent on revenue above USD 10 billion.

Under the earlier Category-I terms, bidders quoted revenue-share percentages at two points: USD 0.05 million and USD 7 million of revenue a day. The share at the higher point was capped at 50 percent. The regular modalities allowed deepwater contractors to pay the rate quoted at the lower point for the first seven years from early monetisation of a discovery.

Easier terms for ONGC and OIL partners

The notice also eased the terms for consortia operated by Oil and Natural Gas Corporation (ONGC) or Oil India Ltd (OIL). Where the operator demonstrates 100 percent of the required net worth, its partner’s net worth need not be evaluated separately, the notice said. The relaxation covers partners that are international oil companies or foreign national oil companies, including their exploration and production subsidiaries, with a net worth of USD 10 billion or more. DGH’s regular modalities stipulated that each consortium member must meet the net-worth requirement in proportion to its participating interest.

The same class of partner will also be able to assign its interest without prior government consent, according to the notice. This applies where the assignee is an Indian national oil company that has already signed the contract.

The parent company financial and performance guarantee will not be required where a bidder qualifies on its own standalone net worth, the notice said.

Single bid bond across all bids

Bidders will have the option of a single revolving bid bond of USD 2 million, valid across all special OALP bids, the notice said. It also gave bidders the flexibility to furnish the bond along with each bid. Either way, the bond must be an electronic bank guarantee (e-BG) or an insurance surety bond (ISB) regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The regular modalities required a bid bond of USD 20,000 per sector with each bid, capped at USD 200,000. It could be furnished as a bank guarantee or an insurance surety bond, valid for 12 months.

Part of Samudra Manthan

The special round will be introduced under ‘Samudra Manthan,’ the National Offshore Exploration Scheme, which the Union Cabinet approved the scheme on July 31 with an outlay of Rs 84,084 crore up to 2030-31. Of this, Rs 43,200 crore was allocated for drilling 60 deepwater and ultra-deepwater exploratory wells. The government will support up to 50 percent of eligible drilling cost on these wells, subject to a cap of Rs 675 crore a well. The government put the cost of a single deepwater exploratory well at about USD 125 million to USD 150 million. A further Rs 28,534 crore was set aside for offshore seismic data acquisition.

Follow PSU Watch on LinkedIN

Detailed terms to follow

The detailed Notice Inviting Offer (NIO), the Model Revenue Sharing Contract (MRSC) and the special OALP modalities will be hosted on the DGH website and the e-bidding portal, the notice said. It encouraged prospective bidders to identify areas of interest on the National Data Repository (NDR) ahead of the first EoI window. The notice said it was for information only. The terms of the NIO, the OALP modalities and the MRSC, would be published later, said DGH.

(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated.)