NELP-VI bids examined by ECS on 23rd November

Vol 10, PW 15 (16 Nov 06) People & Policy

Good news for those keenly waiting for the results of the oil ministrys NELP-VI bidding round.

PETROWATCH learns the Empowered Committee of Secretaries, a group of senior bureaucrats, will meet on 23rd November in Delhi to consider the oil ministrys recommendations. Unlike earlier NELP rounds, the ECS faces an unprecedented situation this time because of protests from companies about the fiscal terms offered by rival bidders.

British Gas, ENI, BP, and others have pointed out that rival bidders have, in some blocks, offered the government a profit share as high as 91% in the initial period only to reverse this ratio as the investment multiple increases. We understand the ministry is now discussing this issue internally against the background of the recommendations sent in by the DGH on the bids received.

The final decision will have to be taken by the ECS, says a ministry source. We have never faced this kind of a situation before.

In NELP-VI more weight is being given to the fiscal package to the government unlike in earlier rounds when the focus was on the work programme. Of the bids received for 52 blocks, in about 18 blocks the first ranked bidder has offered the government a profit share as high as 91 or 92% in the initial period.

Going by the NELP-VI criteria, such blocks should be awarded to these first ranked bidders. But this high profit share offered to the government does not impress oil ministry officials.

Says a ministry source: In many cases the government share plummets to zero as production increases. More, this kind of fiscal package is totally illogical.

Adds our source: This does not happen anywhere in the world (that) as your production increases and profits go up the governments share comes down to such low levels. By no stretch of imagination can there be a situation where the governments share comes down to zero.

The ministry calls such bids as rogue or regressive. But what choice does it have