Sort out cess, royalty issues before Nelp-VII bidding: ONGC

Written by Sanjay Jog | Mumbai, Aug 30 | Updated: Aug 31 2007, 05:17am hrs
State-run Oil & Natural Gas Corporation (ONGC), whose future exploration strategy is focused at searching for higher risk structural stratigraphic traps, has approached the petroleum ministry and the directorate general of hydrocrabons (DGH) for resolution of certain issues before the bidding process for the New Exploration Licensing Policy (Nelp)VII. ONGC proposes to join hands with major international players to participate in the bidding for Nelp-VII.

It has argued that the issue related to payment of royalty and cess on the participating share of other partners under pre-Nelp exploratory blocks should be sorted out on a priority basis.

This payment is being made as a licencee on the production taken out from discoveries made under pre-Nelp exploratory blocks. ONGC has recalled series of presentations that have already been made in this regard.

The PSU has stated that it was paying royalty and cess on various exploratory blocks offered under pre-Nelp rounds, as per the current prevailing rates. It has, however, requested to provide them with fiscal stability against the increase in cess beyond Rs 900 per mt and royalty beyond Rs 528 per mt.

ONGC has proposed fiscal stability in view of the relevant article in various PSCs providing for the situation that where due to any change in or to any Indian Law, rule or regulation by any authority dealing with income tax or corporate tax or other duties imposed by the government upon the valuation of petroleum, results in material detrimentto the economic benefits accruing to any of the parties to the contract.

Further, ONGC has sought clarification on the extent of liability of ONGC for payment of cess. According to ONGC, it may be allowed to deposit cess only on its share of production and not on the total production coming out of discoveries made under pre-Nelp as the cess liability does not arise in case of being a licencee.