Nepal, a small Himalayan country, lies in Central Asia between China to the north and India to the south. (Figure-1) Southern Nepal occupies some 20 to 40 kms wide Terai Plain (Indo-Gangetic Plain) about a few hundred meters above sea level. The Terai and the Siwalik areas are in the foreland of the Nepal Himalaya and are known for sedimentary basins with considerable thickness. Several sedimentary formations of the basins could have generated petroleum and could be located in suitable structural traps. Terai and Siwaliks are thus target areas for hydrocarbon exploration. This part of the country is covered by road (Figure 2) and air networks (Figure 3), electricity lines etc. and is the most accessible region in Nepal.

It is notable that oil and gas seeps have been observed to the north of Main Boundary Thrust (MBT) in different parts of the country from the time immemorial. These seepages as in Dailekh, western Nepal were subjected to only the preliminary analysis in the sixties, but extensive geochemical studies were done in 1993. One of the gas seeps in Dailekh is shown on back page.

Systematic Petroleum exploration activities began only in 1979. The Department of Mines and Geology (DMG) has conducted Airborne Magnetic Survey in 1978-79 over the Terai and Siwalik belts of the country covering an area of 48,000 sq.kms with the help of IDA/World Bank. (Figure 4). The survey has shown encouraging results. Government of Nepal has then established a separate unit "Petroleum Exploration Promotion Project" in 1982 to promote and monitor the exploration works in the country.

Nepal is divided into 5 Development Regions and 75 Districts. Nepal is a republican democratci country and a now rapidly expanding free market economy. The international private investor will find this free market philosophy supported by the legislation enacted for the new Industrial and Foreign Investment Policy, which also guarantees that no industry shall be nationalized. Furthermore it has promoted the concept of "one window shopping" which is now in place within the PEPP/DMG to deal with all matters relating to petroleum exploration and production activities in Nepal.

Responsibilities for Petroleum Agreement
Petroleum related activities fall under the administration of the Department of Mines and Geology and in particular under the administration of the Petroleum Exploration Promotion Project/Department of Mines and Geology (PEPP/DMG). The Project Chief of the PEPP is the primary contact for all petroleum matters, irrespective of their nature. Under delegation from the Ministry of Industry, the PEPP/DMG, together with an appointed team of experts, will be empowered to undertake negotiations with oil companies in regard to Petroleum Agreements. In addition the Project will monitor ongoing exploration and production activities and provide assistance in all operational matters. A Petroleum Advisory Board, composed of senior officials of most ministries, exists and has broad powers and responsibilities for all petroleum related activities.