Fearing investor backlash on ambiguity over tax holiday for natural gas, India today deferred roadshows for the largest ever auction of oil and gas blocks and the new dates would be worked out after elections.
The promotional roadshows for 70 oil and gas blocks offered for bidding under the eighth edition of New Exploration Licensing Policy (NELP) and 10 coal bed methane (CBM) areas were to begin on April 20 but the programme has been deferred.
"Concerns had been expressed by several potential bidders on lack of tax holidays for natural gas, similar to the ones given to crude oil production. We could not have got the issue sorted out just now because of elections. So we decided that let the issue be dealt by the new government," Petroleum Minister Murli Deora told from Mumbai.
The Finance Ministry had in 2008-09 budget scrapped the 7 year tax holiday or exemption from payment of income tax on natural gas production. Though oil and gas naturally occurred together and a single well could be producing both, the incentive was restricted only for crude oil production.
The move drew flak from oil majors who kept away from the previous NELP-VII round that closed after the announcement.The tax issue will have to be addressed after elections and a new schedule for roadshows and bid closing worked out thereafter, Deora said.
The Government had launched NELP-VIII and CBM-IV on April 9 and bids were to close on August 10.
"We were faced with a scenario where we would have completed one phase of roadshows and results of the elections announced. So, we decided to defer the programme," Deora said. The first roadshow was to be held in Mumbai on April 20, followed by similar events in Perth (April 27-28), London (May 4-5), Washington (May 11-12) and Calgary (May 14-15).
"The roadshows have been cancelled and new dates will be reworked after (the) elections," said V S Sibal, Director General of Directorate General of Hydrocarbons. Oil Secretary R S Pandey said only roadshows have been deferred and the last date of bidding may not necessarily be shifted as there were enough time for bidders to decide.
India had offered 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks for bidding in NELP-VIII hoping to attract $3 billion investment in exploration.
The 75 % import dependent nation also offered for bidding 10 areas for extraction of gas from below coal fields or CBM, at a time when energy firms worldwide are cutting investments because of falling prices and economic recession.
Besides tax breaks, there were concerns over Government encroaching the pricing and marketing freedom guaranteed in NELP as was evident in case of Reliance Industries' KG-D6 discoveries where the government first took it upon itself to fix the rates of natural gas and then dictated individual customers, whom the fuel has to be sold to.
Asia's third-largest energy consumer is aiming to cut oil imports and has till now awarded 203 blocks in previous seven rounds with over $ 11 billion committed in exploration spend. Besides, 23 blocks have been awarded in previous three CBM rounds. More than 6 Trillion cubic feet reserves have already been established in four CBM blocks.
Since its advent in 1999, NELP has given 68 oil and gas discoveries in Cambay onland, North East Coast and Krishna Godavari deep water areas, totalling over 600 million tons of reserves.
Worldwide spending on oil and gas exploration may drop 12 % in 2009 to $ 400 billion, Barclays Capital Research has stated.
India had offered 57 blocks in NELP 7 last year and awarded 44 to companies like BHP Billiton and Oil and Natural Gas Corp (ONGC). In the first six rounds, 162 areas with an investment commitment of $ 8.33 billion were awarded.
Of the total committed investment of $ 8.33 billion received in the first six rounds of NELP,$ 3.887 billion had already been spent by oil and gas companies till March 2007. Of the $ 8.33 billion promised investment, the largest commitment of $ 3.32 billion was received in NELP 6 where 52 out of 55 blocks on offer were grabbed.
