The government is planning to call for global bids to conduct oil and gas exploration in the country.

Encouraged by the feasibility studies carried out one and a half years ago, which showed high probability of discovering petroleum, the government wants to move forward and find out how much oil and gas there may be in various potential sites across the country.

The government in association with China had conducted feasibility studies in 10 locations including Dailekh, Nepalgunj, Chitwan, Mustang, Morang, Chatara and the Chure range in Palpa.

Following the study, Nepal and China signed a memorandum of understanding during the visit of Chinese Vice-Premier Wang Yang last August.

A framework agreement was signed with the northern neighbour to promote investment and economic cooperation and draw on Chinese private and public assistance to carry out oil and gas exploration.

Sudhir Rajaure, joint secretary at the Department of Mines, said they planned to call for bids from foreign companies after China completes preparing a detailed work plan regarding the agreement.

“We are in regular touch with Chinese officials who have informed us that they are preparing the working procedure for oil and gas exploration,” Rajaure said.

The government has divided the Tarai and Siwalik hills into 10 exploration blocks, each of which is spread over 5,000 square kilometres. The department has estimated that exploration costs will come to Rs3.5 billion per block, according to Rajaure.

“A preliminary report shows a high possibility of finding petroleum in the Tarai and Chure regions. However, we need to drill to determine whether the potential deposits are economically viable,” he added.

The government decided to call for fresh bids after scrapping the permits of several foreign companies two years ago. After Nepal embarked on petroleum exploration in the late 1990s, a number of foreign companies had expressed interest in conducting studies and were issued exploration permits.

However, they were working very slowly, and the government eventually cancelled the licences of all of them. The companies who lost their licences are Texana Resources Company and BBB Champion of the US, Cairn Energy PLC of the UK and Emirates Associated Business Group (EABG) of Dubai.

Rajaure said the department had sought to bring advanced technology into oil exploration by calling for fresh bids. According to him, the government has amended the Petroleum Regulation 1985 for the fifth time.

“The revised law contains a provision forbidding foreign companies from delaying exploration which appeared as one of the major setbacks in the contracts awarded earlier,” Rajaure said.