Bidding for last round of Nelp blocks extended to April 25

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New Delhi, Mar 10: The government has postponed the last date of bidding for oil and gas blocks offered under the latest round of Nelp to April 25, even as industry cried foul at finance minister P Chidambaram’s proposal to end tax holidays for the sector.

The last date for bidding for 57 areas offered under the seventh round of New Exploration Licensing Policy (NELP) has been changed from April 11 to April 25, said S Sundareshan, additional secretary, ministry of petroleum and natural gas, at a CII event here today.

But Chidambaram’s Budget proposal to end seven-year tax holiday for production of petroleum (oil) and natural gas may prove to be a dampener to the government’s efforts to attract at least four billion dollar investment in oil and gas exploration.

E&P companies, particularly foreign players, said the proposal would be a dampener and impact investor sentiments as seven-year tax holiday has been the salient feature of all NELP bid rounds, including the latest one.

“It (end of tax holidays) won’t stop us from bidding but it will change the way we will be bidding,” BP Exploration Director for South Asia Jonathan Evans said.

Sundareshan said the ministry of petroleum and natural gas has taken up the issue with the Finance Ministry as the new proposal was contrary to the fiscal regime promised in Nelp rounds.

“We need a stable fiscal regime. Too much tinkering is not good for investor sentiments, particularly when we are looking at increasing self-sufficiency in oil and gas,” V Raghuraman of CII said.

Niko Resources Vice-President Larry Fisher said the move would change the way companies construct their bid. Evans said investors like to see fiscal stability.

“Fiscal bids will change if the tax regime is changed. We need some clarity well before April 25.” Sudhir Mittoo, India representative of Petrobras of Brazil, said the change in tax holidays was a worrying factor.

“E&P investments are huge. So, when are we going to get returns if tax holiday is not there?” Companies bidding for the 29 onland, 19 deep sea and 9 shallow water blocks of Nelp-VII will account for longer period for investment recovery in absence of the tax incentive thus offering lesser share of production to the government.