NEW NELP TERMS FOR ONGC - JUST IN TIME!

Vol 3, PW 15 (18 Aug 99) Exploration & Production
     

Coincidence or just good timing Alongside reports of ONGCs deepwater strike, comes welcome news that the Indian government is set to award ONGC a host of fiscal incentives to carry out deepwater exploration.

These incentives were originally designed to encourage bidding under the New Exploration Licensing Round (NELP). In the past year ONGC has fought an uphill battle to convince the oil ministry that it too needs NELP terms to make exploration viable in five deepwater permits of its own.

In May this year (PW Vol 3/Issue 10 9--BREAKTHROUGH IN ONGCS DEMAND FOR NELP TERMS) we reported how the oil ministry finally relented. Now, Bikash Bora, Chairman, ONGC, confirms to this report, that the government's Empowered Committee of Secretaries (the final rung of red tape before cabinet) held a meeting on August 5th, in which it agreed to recommend ONGCs demands to the Indian cabinet for approval.

"We feel this issue has been resolved to our satisfaction", Petrowatch is told. Upcoming elections make it unlikely the cabinet will examine this issue until October at the earliest.

One source predicts it will happen before the end of August. Approval on this core issue will be a significant boost for ONGC.

Exactly a year ago, six oil majors (Unocal, Mobil, Total, Elf, Marathon and Chevron) entered talks for a possible joint venture in ONGCs nomination licence areas. Disagreement between ONGC and the oil ministry over terms forced ONGC to temporarily abort the project.

Now, the company awaits a formal "green light" from the ministry before recontacting interested parties. TABLE: KEY NELP FEATURES *Foreign and domestic companies to get tax holiday for seven years from the start of commercial production *No customs duty levied on imports required for petroleum operations under NELP *Biddable cost recovery limit exists up to 100% *Option to amortise exploration and drilling expenditure over a period of 10 years from first commercial production.

*Royalty for deepwater areas beyond 400 metres chargeable at 5% for the first seven years of commercial production.