History of Exploration in Nepal

A series of geological, geochemical and geophysical works were carried out after the completion of the aeromagnetic and seismic reflection survey in a regional grid pattern by the Compagnie General de Geophysique (CGG) and Petro-Canada (over 3,000 line km).

Hunting Geology and Geophysics Ltd. (1985) conducted a photogeological study over 60,000 sq.kms. area of southern Nepal (Figure 5 ). It has been useful to establish the structures in the Siwalik belt.

Terai and Siwaliks have been divided into 10 Exploration Blocks, each of approximately 5,000 sq.kms in the area. These blocks were opened for bidding exploration acreage in 1985 for the first time (Figure 6).

Shell Nepal B.V. (1986-90) carried out exploration works in Nepal (Block 10) including the geochemical study of seep samples. It has also acquired gravity and seismic survey (over 2,000 line km) in a close grid pattern. The company had drilled an exploratory well (TD.3520m) to test the hydrocarbon potential of a seismically defined structure. The hole was dry and did not penetrate up to the basement. The result obtained from the drilling has created a valuable database for the exploration venture.

Since 1982-1992, over 5,000 km of multi-fold seismic data has been acquired. The field survey provides regional seismic coverage of most of the Terai and limited coverage in the Siwaliks (Figure 7). The data has been processed and interpreted by different seismic service agencies. A number of valuable geophysical interpretation reports are available in the Kathmandu Data Centre.

Regional Hydrocarbon Occurrences

In the regional hydrocarbon occurrences, it is noteworthy that the Ganga Basin of Nepal is on a trend with the Potwar Basin to the west in Pakistan and the Assam Basin to the east in India. Both of which have similar geologic histories to Nepal and have proven to be hydrocarbon bearing with a long history of successful exploration and production operations. (Figure 8). A number of wells are drilled in the Indo-Gangetic Plain all along the southern border of Nepal by Indian Oil Companies and have shown some positive results for hydrocarbon in the northern part of this Ganga Basin. Moreover, the basin is found deeper in the Nepal side from the seismic data. Texas Resources Company of Texas, USA has recently discovered a huge oil field in Wichita, Texas, which is also structurally very much similar to the subsurface structures of West Terai Plain of Nepal. have some similarities with the foothills and western plains of Alberta and British Columbia (Slind, 1994).

Hence, the presence of oil and gas seeps in western Nepal along with the existing analogous basins of Potwar and Assam, hydrocarbon indications in the Indian wells of Ganga Basin, Comparative geological structure of Wichita with subsurface of West Terai, and similar foothills and plains as of Alberta and British Columbia, lead us to believe the possibility of hydrocarbon occurrence in this Himalayan country. None the less, a continuous petroleum exploration works by the Indian Oil Companies all along the southern Nepal border and an indication of some hydrocarbon occurrences gives an additional information of the possibility of an oil field in the Nepal side i.e. in Terai and Siwaliks region of Nepal.

The occurrence of Oil and Gas Seeps

There are two areas of confirmed seeps in Nepal (Figure 9), both lying north of the Main Boundary Thrust (MBT).

Muktinath gas seeps - an active gas seep has been known since the beginning of historical times in the Muktinath region of northern Nepal. The seep emanates from Jurassic beds in the Tethys facies north of the MCT and for this reason, it is thought to have no relation to petroleum possibilities in southern Nepal.

Dailekh oil and gas seeps - in the Dailekh region of western Nepal, at a location 30 km north of the Main Boundary Thrust (MBT), is located a series of steps which are of major importance in the exploration for hydrocarbons in Nepal. There are some 45 separate gas seepages, many of which have religious temples constructed over them. The gas seeps are continuously coming out up till now (Plate 1A - Plate 1B - Plate 2A - Plate 2B). The oil seeps are occasional and recorded during the rainy season (Plate 3A - Plate 3B).

The oil samples and several gas samples were obtained from a seep in the Dailekh area. These samples have been analyzed and indicate that this oil and gas has a geological origin from a mature source rock. Chromatograms suggest the oil samples represent light (mature) oil that has been severely biodegraded. The presence of C2 and higher molecular weight gases and their isotopic composition indicate the gases are thermogenic and derived either from a mature source rock or from the cracking of oil, rather than a shallow biogenic source. The proportion of higher homologies (C2 to C5) suggests that the gases were associated with oil. Combining the interpretation of the four analysis implies that the seeps originate at depth and are migrating rapidly to the surface along steep faults in the metamorphic rocks. The most likely ultimate source is a ruptured reservoir in non-metamorphic Paleogene beds underlying the thrust metamorphic rocks at a shallow depth. These Paleogene beds might have some geological relation with the subsurface Palaeogene beds of the south-lying Ganga Basin.

The Palaeogene beds along with some other sediment are proved as source rocks in Potwar of Pakistan in the west and in Assam of India in the cast. The geological conditions as in Potwar and Assam does exist in Nepal also. Therefore, Palaeogene and other sedimentary formations in the subsurface of Terai and Siwaliks are potential for the hydrocarbon exploration in Nepal. And the steps are of importance in the search for oil and gas.

Structural Trapping Mechanisms

The principal play recognized in southern Nepal lies in the Surkhet Group with the indigenous source, reservoir, and seal, and with a wide variety of potential trap types(Figure 10). The Paleogene is the imputed source for the Dailekh oil and gas seep area of western Nepal. It is also considered to be a source rock in the Terai and Siwalik of southern Nepal. Secondary plays, alluded to above, embrace the lower Siwaliks, the Gondwana and possible Upper Vindhyan reservoirs.

The regional seismic grid over most of the Terai and part of the Siwalik Fold Belt has allowed identification of a number of different structural leads. It has allowed the identification of a number of the different structural trap( Figure 11 ). On the other hand, when Shell acquired their 2000 km. detail grid in Block 10, they were able to identify numerous prospects and leads not previously seen on the regional grid. This same phenomenon is expected to be generally true in the remainder of Nepal because of the similarity in geologic history.

The trapping mechanisms include anticlines and thrust faults developed in the Siwalik Fold Belt and "blind" thrusts developed under the Terai ahead (south) of the Main Frontal Thrust. In addition, under the Terai we can expect structural closures associated with basement controlled faults, graben edge folds, and fault closures, draping over pre-existing highs, and stratigraphic traps caused by reservoir pinch out, facies changes, permeability barriers etc. (Figure12).

The limited seismic lines in Siwalik foothills indicate major folds (Figure 13) and thrust faults with substantial potentially prospective pre-Siwalik which is supported by a gravity survey and also by surface geology.

Model Petroleum Agreement

This document acts as the basis for bid preparation, evaluation, negotiation and subsequent administration of the Agreement. The Production Sharing Contract (PSC) is well constructed and fair. It recognizes the relatively high risk of exploration ventures in Nepal and makes allowances for this fact in the relaxed and attractive terms. Having the Petroleum Exploration Promotion Project (PEPP)/Department of Mines and Geology (DMG) act as the single focal point for all operational, tax and legal questions is a significant advantage.

Some of the advantages of the PSC are the fact that there is no requirement for signature or production bonuses, no stipulated government participation or back-in-right, a substantial amount of cost oil is given, liberal amortization and loss carry forward provisions are in place and all import duties are waived. Repatriation of profits is allowed as in the export of the contractor's share of petroleum. Repatriation can be done in any foreign currency and conversion is guaranteed at market rates. There is no requirement to take partial payment in Nepali Rupees pegged at an artificially low rate.

 Source Rock Maturity Basin Modeling

A considerable geochemical work has been done in Nepal. The oil seep of Dailekh in Western Nepal is a high grade, mature, biodegraded crude interpreted to have come from a conventional mature source rock. These hydrocarbon seeps occur in fault trend from metamorphic rocks indicating that source rocks are buried below the thrusts and expelling hydrocarbons.

A modeling study was conducted for three widely separated locations in southern Nepal using a numerical technique, which calculates a one dimensional model of the evolution of sediment compaction and hydrocarbon generation. Input parameters to the model include the thickness, age, and lithology of the rocks, a description of the source organic matter and the current and past heat flow or temperature parameters.

Models were constructed for eastern (Biratnagar-1), central (Lumbini) and western (Dhangadi) Nepal. The Shell Biratnagar-1 well was used to calibrate the model for eastern Nepal. In addition, outcrop information and subsurface seismic data were also used. An example of the output is given in Figure 14 which is the burial depth versus maturity plot for Lumbini, central Nepal. It is clear from this Figure that the Suntar, Swat, Melanie and Gondwana units fall within the oil window, whereas the Lakharpata unit is well within the gas generating window.

Conclusions of this basin modeling were that the level of thermal maturity is predicted to be somewhat higher in the west relative to the east for a given stratigraphic interval. The petroleum source rocks that have been identified below the Siwaliks down to the upper part of the Vindhyan, are expected to occur within the oil window at most locations in southern Nepal. Deeper units will be more perspective in the east and shallower units more perspective in the west. The timing of petroleum generation is calculated to be a very recent phenomenon, probably within the last 5 to 10 million years. While the structural deformation which caused trap formation also resulted in the rapid burial of pre-Siwalik units, because of thermal time lag, oil generation, expulsion, and migration are considered to have been contemporaneous with or to have post-dated the formation of the traps.

Data Sales Packages

The geological and geophysical works carried out by the Petroleum Exploration Promotion Project, DMG meets the international standard of the oil industry. The database contains over 5000 km of multi-fold seismic reflection data (Figure 7) and a number of valuable geophysical as well as geological reports including an update well data.

The database is divided into 21 different Data Sales Packages (DSP) from "A" to "U". A General Report, which is a summary document, is available at a price of US$ 5,000.00 per copy. It covers the general aspects of the technical hydrocarbon potential, the fiscal terms and work obligations expected for operations in Nepal. The document contains sufficient detail for a company to make an informed decision about the hydrocarbon potential of the country and furthermore contains a working economic model on 3.5" diskette (either in Excel or Lotus 1 2 3 ) suitable for cash flow sensitivity analyses. Purchase of the General Report is a pre-requisite for companies wishing to purchase other data, visit the Kathmandu Data Centre or to lodge a formal bid for exploratory lands (See Appendix 1- Description and Price Schedule of Available Data).

Petroleum Legislation

There are two sets of enabling legislation which govern the negotiation, the conduct of petroleum-related operations and the fiscal treatment of these activities. These are: Nepal Petroleum Act, 2040 (1983)

Petroleum Regulation, 2041 (1985), the Petroleum (First Amendment) Regulation, 2046 (1986), and Petroleum (Second Amendment) Regulation, 2051 (1994),

Nepal Petroleum Act, 2040 (1983)

This is the broad enabling legislation which permits Government to enter into Petroleum Exploration and Production Agreements, with suitable (international) oil companies ("CONTRACTOR"). The Department of Mines and Geology is designated to administer the application for and negotiation of Petroleum Agreements.

Petroleum Regulation, 2041 (1985) with Amendments

These rules which expand on the Nepal Petroleum Act established the procedure for bidding, evaluation of bids, negotiations and granting of Petroleum Agreements. It specifies the Department of Mines and Geology as the responsible agency for negotiation of Petroleum Agreements and their administration subject to the Petroleum Act.

A second amendment contemplates the following:

The contractor may hold more than one block. "No Ring Fencing" of blocks is allowed the recognition of a "seismic option" as an acceptable bid; the designation of the Secretary Ministry of Industry as the signatory of the Petroleum Agreement on behalf of Government, and the delegation of greater operational authority to the Project Chief, Petroleum Exploration Promotion Project (PEPP).

Schedule 2 of the Regulations contains the complete Model Petroleum Agreement, which acts as the basis for bidding, negotiation, and administrator of such Agreements

Exploration and Development Cost

There is a good network of roads in the Terai, with important N-S feeder routes into the Siwalik Fold Belt. In the Siwaliks, the roads network is sparse and mobile operations will be difficult. Typically seismic and drilling equipment will have to be imported and with the nearest port facilities some 600 km. away in India, mobilization and demobilization costs will be a factor.

Exploration costs are comparable with similar operations in other parts of the world. The seismic surveys may cost the US $ 4,500 per line kilometer in the Terai and US $ 7,000 per line kilometer in the Siwalik fold belt. Only one well, the Sheller al Biratnagar 1, with a TD of 3,520 m. has been drilled in Nepal. The well was drilled on Block 10 within the Terai and was supplied out of Singapore. A typical 4,000 m. well is expected to cost approximately US $ 8.0 M.

Geological Setting

Nepal lies between India to the South and China to the North. It extends 800 km from East to West ranges and 130 to 230 km in North-South. The country is naturally separated into four major geographical/geological zones (Figure 15 and 16) parallel to its long dimension (Frank and Fuchs, 1970; Mitchell, 1979; Stocklin, 1980; Windley, 1983).


The Terai is the Nepalese portion of the Indo-Gangetic Plain that extends from the Indian Shield in the South to the Siwalik Fold Belt to the North. The plain is a few hundred meters above sea level and usually 400 to 600 m thick. it is composed of Recent of Quaternary alluvium, boulder, gravel, silt, and clay. Terai Plain is underlain by a thick, relatively flat-lying sequence of Mid to Late Tertiary molasse (Siwalik Group) which unconformably overlies subbasins of early Tertiary to Proterozoic sediments (Surkhet, Gondwana and Vindhyan Groups) and igneous and metamorphic rocks of the Indian Shield (Agrawal, 1977; Acharya and Ray, 1982; Raiverman et.a.l, 1983).

Siwalik Fold Belt

The Siwalik Fold Belt is from 5 to 45 km wide and rises abruptly from the Terai along the Main Frontal Thrust (MFT). It consists of a series of ridges and valleys composed of thick beds of folded and faulted Tertiary Molasse of Siwalik Group thrust to the South (Parkash et.al., 1980; Herail et. al, 1986). Gravity measurements and detailed field mapping indicate that the cores of at least some of these structures contain pre-Siwalik rocks that are considered to be hydrocarbon objectives (Friedenreich and Slind, 1986; Elber, 1989).

Lesser Himalaya

The Lesser Himalaya is a wide, stratigraphically and structurally complex zone that lies immediately north of the Siwalik Fold Belt and is separated from it by the south-verging main boundary fault (MBT). The majority of the Lesser Himal is composed of thrust sheets and nappes of metasediments and metamorphic rocks with granitic intrusions of the Midland Group. The Group is of little hydrocarbon exploration interest, although the oil gas seeps of the Dailekh (Figure 9) area occur within the Midland Group (CPIT, 1973). These steps are interpreted to have been generated in sediments below the nappes.

Higher Himalaya

The Higher Himalaya which contains the spectacular peaks of the Great Himalayan Range, Everest, Annapurna, etc. is thrust southward over the Lesser Himalaya along the Main Central Thrust (MCT). The zone is composed of a basal slab of metamorphic Proterozoic rocks overlain by a conformable sequence of Cambrian to Eocene Tethyan Sediments (Bordet et al., 1981). Gas seeps occur in the upper Tethyan of northern Nepal near the village of Muktinath (Figure 16).  

Petroleum Exploration in Nepal   

There are four major groups of rock units interesting for petroleum exploration in Nepal. These are the Siwalik, Surkher, Gondwana, and Lakharpata (Vindhyan) Groups (Figure 15 and 16).