Date:12/01/2007 URL: http://www.thehindubusinessline.com/2007/01/12/stories/2007011204931000.htm

Back Secretaries panel likely to meet on Monday for NELP VI

Our Bureau

To discuss issue of profit sharing in certain blocks

New Delhi , Jan 11

A decision on winners of the latest round of New Exploration Licensing Policy (NELP-VI) may be expected soon, with another meeting of the empowered committee of secretaries (ECOS) expected on Monday.

Official sources told Business Line that the committee comprising Secretaries of the Petroleum, Finance and Law Ministries is likely to meet on January 15 and deliberate upon the recommendations made by the Directorate-General of Hydrocarbons (DGH) on the prospective winners as well as the concerns raised by a section of industry on Government's share of profit petroleum in certain blocks.

Extreme package

Apprehensions were expressed on the "extreme financial package" offered by some of the bidders for different blocks.

At its earlier meeting, the committee, which makes the final recommendations for NELP winners, had also considered the issue including the views of the DGH.

The DGH had suggested that negotiations be undertaken with the bidders wherever the profit share percentage is falling or initially falling and subsequently rising.

However, since it was felt that the entire bidding process was very transparent and best offers have been received under the auctioning round, negotiations may not be required.

Out of 52 blocks to be awarded, nearly 19 had received "extreme financial packages," including those from Reliance Industries, OIL, Focus-Newbury and Petrogas-GAIL-IOC-GSPC-HPCL and Naftogaz-RNRL-Geopetrol combines.

Profit petroleum

The Petroleum Ministry has been maintaining that the issue of profit petroleum has to be viewed in the context of geological prospectivity of the area and that the bids received were right under the NELP guidelines.

The objection was that the bidders have shown a lower share for the Government in the later years of production from the 19 blocks (both deepwater and onshore) under question.

This in effect would mean that if there is an increase in production at a later stage, the Government would lose out on its share of oil and gas from that find.

In the latest round of NELP more weight is being given to the fiscal package to the Government unlike in earlier rounds when the focus was on the work programme.

Guarantee

According to sources, the committee may ask the bidders to guarantee that the Government's share will remain stable at a reasonable level after falling gradually from the highs offered in the initial investment phases.

Industry sources said that declining profit share could not necessarily be rejected when the net present value offered by the bidders is highest among all participants.

The issue was around the interpretation of the principle of "sliding scale of the pre-tax investment multiple," the official said.

The bidders, as per bid evaluation criteria, were expected to indicate profit share proposed to the Government against the per-tax investment multiple in tranches.