| CCEA okays Nelp VII award, to attract $1.5 bn investment | |
| BS Reporter / New Delhi November 20, 2008, 20:20 IST | |
The Cabinet Committee on Economic Affairs (CCEA) today approved the award of 44 oil and gas exploration blocks, which is expected to attract investments of $1.5 billion.
Of the 45 blocks that received bids in the seventh round of auction under the New Exploration Licensing Policy (Nelp VII), the CCEA did not award a deepwater block in Mumbai basin to Cairn Energy India as it bid too low and said it would be "detrimental to the government's interest in future in terms of profit petroleum". Cairn was the sole bidder for the block.
Oil and Natural Gas Corporation (ONGC), India’s largest oil and gas producer, and its partners bagged the maximum number of 20 blocks in India’s largest ever bid round that closed on June 30. Australian mining major BHP Billiton and its partner GVK Power, bidding for the first time, won seven deepwater blocks.
Reliance Industries, India’s largest company by market capitalisation, in partnership with British Petroleum, the world’s third-largest oil company, won one block in the Krishna-Godavari basin off the Andhra Pradesh coast.
Minister of State in the Prime Minister's Office Prithviraj Chauhan, told reporters after the CCEA meeting that the production sharing contracts for the 44 block would be signed in a month.
“It is expected that the award of the blocks under Nelp VII will result in more discoveries, further investments in development of oil fields leading to higher reserves accretion and eventually, production of oil and gas,” he said.
The government had offered 57 oil and gas exploration blocks under the Nelp VII auctions. However, 12 blocks did not receive any bids.
Officials with oil companies and the petroleum ministry say that the 12 blocks did not receive any bids as oil companies were not sure if they will be eligible to claim a seven year income tax holiday for the oil and gas they produce from blocks under Nelp rounds.
Earlier, this year, the finance ministry had withdrawn this benefit for gas production but allowed it for oil. The petroleum ministry had also issued a clarification in June this year, three days before the bidding closed.
The CCEA today also allowed the petroleum ministry to issue the tax holiday clarification as an appendix to the production sharing contracts for Nelp VII.
The Nelp VII auction also resulted in many blocks receiving single bids. Analysts said that since almost 80 per cent of the total number of blocks on offer were “recycled” from previous Nelp rounds, companies were not confident of making discoveries.
Government officials, however, cite numbers to prove that the Nelp VII round was successful. “181 bids were received from public sector and private/foreign companies for 45 blocks (12 deep water blocks, 7 shallow water blocks and 26 on-land blocks). A total of 95 companies, including 74 Indian companies and 21 foreign companies had submitted bids for 45 blocks,” the petroleum ministry said in a statement.
“This round drew the maximum number of bids per blocks. If that is not success, what is?” said an official in the ministry.
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