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Last Updated: May 20, 2007 - 10:48:48 AM
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Deferred poll makes Nepal lose 'energy'
Apr 25, 2007 - 1:39:09 PM
With Nepal having two more blocks open for exploration, other companies are also showing interest in obtaining a licence.

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[RxPG] Kathmandu, April 25 - With the date for a crucial election being put off indefinitely in Nepal, the government is losing potential revenue that could be earned from oil exploration in the southern plains and change the cash-strapped Himalayan nation's economy.

Two Western companies have shelved their plans to tap Nepal's southern Terai plains for oil because of continuing unrest, even after Maoist guerrillas signed a peace pact with the government.

American company Texana and Scottish Cairn Energy Private Ltd hold licences to explore eight blocks in the Terai region, regarded as potential petroleum sites.

However, both companies have been using a clause in their contract that allows them to suspend work under 'inclement circumstances'.

Though Texana obtained a four-year licence in December 1998, it suspended work in 2001 due to escalating Maoist insurgency. It is yet to resume operations.

Cairn, whose stocks shot up in value after the discovery of oil in neighbouring India's Rajasthan state, reached an agreement with Nepal in August 2004.

However, soon after signing the pact, it was forced to invoke the relevant clause in the contract due to fresh violence triggered by King Gyanendra staging a coup in 2005 and seizing total power.

With the king's 15-month reign falling in April 2006 and the Maoists signing a peace pact with the new seven-party government, the Scottish major prepared to return to the field.

However, Cairn's security division is regarding the election - earlier scheduled for June 20 - as a key indicator of peace and stability, on which the resumption of their operations depend.

With Nepal's Election Commission now ruling out the June date due to the fresh unrest in Terai, Cairn officials held a review meeting with the Nepal government Sunday, when they indicated that operations would not resume for now.

'But they are optimistic that work can resume from winter,' Baburaja Arryal, deputy director general and chief of Nepal's Petroleum Exploration Promotion Project, told IANS.

Arryal says there is a strong possibility that the Terai plains will yield oil since their extension in India has done so. 'However, you need at least 10 years' continuous work to get results,' he said.

That is a luxury denied to trouble-torn Nepal so far. Though the first oil exploration in Nepal started two decades ago, the work was left inconclusive.

Oil major Shell obtained the first licence and started prospecting in Biratnagar, home of Prime Minister Girija Prasad Koirala.

Though it had invested about $10 million and drilled up to 3,500 m, the company abandoned the project after then Indian prime minister Rajiv Gandhi sealed land routes between Nepal and India, enforcing a virtual blockade of the landlocked Himalayan nation.

Though India-Nepal relations have improved and the decade-old communist insurgency in Nepal has officially ended, ethnic protests in the plains worry investors.

Arryal says that while Nepal's hydopower potential is touted as a factor that can transform the kingdom's economy, the finding of petroleum can do it faster.

'Shell's pullout sent out a negative message that there was no oil in Nepal,' he said. 'But that's not true. The Indian plains, which have the same composition, have yielded petroleum.'

With Nepal having two more blocks open for exploration, other companies are also showing interest in obtaining a licence.

With the violence substantially reduced since the Maoist peace pact, once the new poll date is announced, the country could draw new investors.

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