The Nepal Petroleum Act, 2040 (1983) and the Petroleum Exploration Regulation, 2041 (1985) as amended in 2046 (1989) and in 2051 (1994), and Petroleum Industry (Income Tax) Regulations, 2041 (1985) issued under the Income Tax Act, 2031 (1974) draw out the legal provision with respect to the development of the Petroleum resources occurring within the country. The Nepal Petroleum Act and Regulations offer attractive and competitive incentives for potential investors both from within and outside the country. The Act grants many rights and benefits to contractors who enter into a petroleum agreement which include:
• Right to export entitlement of petroleum
• Exemption from all taxes and fees except a royalty of not less than 12.5 percent to be prescribed on the value of petroleum sold or disposed of.
• Income tax of 50 percent of net income or profit oil.
• Annual surface rentals for the areas other than those under production at rate of US$ 10.00 to 40.00 per square kilometers and for the area under production at the rate of us $ 500 per square kilometer.
• Nominal miscellaneous fees which include land tax, registration and forestry fees and charges of general application.
• Exemption from custom duties on imported goods;
• Foreign currency facilities and right to repatriate funds;
• Right to employ foreign nationals;
• Right to use the land. The principal play recognized in southern Nepal lies in the Surkhet Group with 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 the southern Nepal. Secondary plays, alluded to above, embrace the lower Siwaliks, the Gondwana and possible Upper Vindhyan reservoirs.
