News: Reliance wins oil block in East Timor

(PTI 30/05/2006) New Delhi - Reliance Industries Ltd has won an oil exploration block in East Timor, taking the number of its overseas oil assets to three.

Reliance, which currently has oil properties in Oman and Yemen, had bid for two of the 11 offshore blocks tendered by East Timor but could manage only one contract area, an industry source said.

"The company had bid for Area 'K' and Area 'E' but won only the former when the awards were finalised last week," the source said.

A Reliance spokesperson could not be immediately contacted for comments.

The company is building a 29 million tonnes per annum refinery adjacent to its existing 33 million tonnes a year refinery at Jamnagar in Gujarat. Besides foraying into domestic oil and gas exploration and production in a big way, it is acquiring assets abroad to supplement its crude needs.

Of the 11 offshore contract areas offered by East Timor in the bidding round, six received a total of nine bids by the deadline of April 19, 2006.

The blocks represented frontier acreages spread over some 30,000 sq km in East Timor's territory and were put up on offer in the second quarter of 2005, alongside four blocks in the Joint Petroleum Development Area, a known petroleum province jointly administered by East Timor and neighboring Australia.

East Timor awarded Eni Areas A, B, C, E and H. Reliance lost out on its bid for Area E as Eni's work program for the block was more extensive, the source said.

East Timor's model production sharing contract offers producers 60 per cent of profit after cost recovery and "uplift", with the government taking the remaining 40 per cent.

Uplift refers to an annual payment to the contractor for unrecovered costs, and has been set at an interest rate of US 30-year bond rate plus 11 per cent.

State royalty has been set at 5 per cent of gross production, and the contractor will pay 30 per cent income tax on profit from its share of output. The exploration phase runs over seven years, with the budgeted spending for the first three years fixed in the bid commitment.