The government has decided to allow China to carry out exploration of natural gas and petroleum in different parts of the country, including the southern Tarai plains, beginning natural gas exploration from Dailekh and Palpa districts in the first phase.  

The Cabinet on Thursday took the decision in this effect. Minister for Communications and Information Technology and government spokesperson Gokul Prasad Banskota told the weekly press briefing on Thursday that the government decided to give the go-ahead to execute the “Agreement of China Aid on Oil and Gas Resources Survey Project”.

“As Nepal has not conducted exploration of oil and gas before, this will be one of the country’s most important projects,” he told the press. 

The implementation of the project was in line with the memorandum of understanding signed with the northern neighbour in 2017. 

In May 2016, a joint technical team from Nepal and China conducted a feasibility study on oil and gas exploration at 10 different locations including Dailekh, Nepalgunj, Chitwan, Mustang, Morang, Chatara and the Chure range in Palpa. 

Following the feasibility study, both countries signed a memorandum of understanding during the Chinese Vice-Premier Wang Yang’s visit to Nepal in August 2017.

Dinesh Bhattarai, joint-secretary of Ministry of Industry, Commerce and Supplies, said the decision has allowed expediting the project. The ministry had tabled the proposal seeking the Cabinet’s in-principle approval last week. 

According to the Department of Mines and Geology, China Geological Survey will drill at six to seven locations to determine the quantity and the quality of potential oil deposits. 

“Based on the preliminary survey conducted in 2016, the Chinese authority has sent us its work plan,” said Som Nath Sapkota, director general of the department. 

The Chinese exploration team will submit data on the quantity and quality of natural gas in the two identified districts to us. 

The government has divided the Tarai and Siwalik hills into 10 exploration blocks, each of which is spread over 5,000 square kilometres. According to Sapkota, Palpa lies in Block 3. However, Dailekh does not come under any of these 10 proposed blocks.

He added that they have plans to invite global bids for the rest of the nine blocks after China completes the first phase of the exploration. The department has estimated that the exploration would cost Rs3.5 billion per block. 

Nepal embarked on petroleum exploration in the late 1990s following which, a number of foreign companies expressed interest in conducting studies and were subsequently issued exploration permits.

However, citing the slow work of the foreign companies that received licences from the department, the government cancelled the licences of all the interested firms three years ago. 

Texana Resources Company and BBB Champion of the US, Cairn Energy PLC of the UK and Emirates Associated Business Group (EABG) of Dubai were among the companies that lost their working licences.