The Indian government has approved allotment of 33 exploration blocks offered under the eighth round of New exploration licensing policy (NELP VIII). ONGC is
the biggest winner with allotment of 17 blocks including 4 KG, 6 Andaman, and 1 Cauvery offshore blocks. ONGC now has 57 blocks (including 46 NELP blocks) in the 5 basins we believe to be highly prospective and high potential. Cairn India (CIL) has been allotted 2 blocks including 1 KG offshore block. Oil India (OIL) has been allotted 9 blocks including 2 KG offshore, 4 Andaman offshore, and 1 Cauvery offshore block. We retain our Buy rating on ONGC.
Of the 33 blocks allotted, 13 are in highly prospective and high potential basins. ONGC has been allotted 11 of these blocks while CIL has been allotted 1. OIL is ONGC’s partner in 7 of the 11 blocks. GSPC is ONGC’s partner in 2 of these blocks. BHP Billiton has been allotted three Mumbai offshore blocks. RIL did not bid for any block in NELP VIII.
There is uncertainty on whether there is tax holiday for gas from NELP I-VII blocks. The matter is being litigated in courts. However, the law was amended in
2009 to allow 7-year income tax holiday for gas production from NELP VIII blocks.
OIL has been allotted 9 blocks including 7 in highly prospective and high potential basins. ONGC is OIL’s partner in all 9 blocks. OIL will be operator in 2 blocks including one Cauvery offshore block. After NELP VIII allotment, OIL's blocks in highly prospective and high potential areas are up to 20 from 13. OIL’s stake in the 7 highly prospective NELP VIII blocks is 15-50% vis-à-vis 10-20% in the 13 highly prospective NELP I-VII blocks.
