Western oil firms were lukewarm to India’s latest licensing round that closed on Monday, deterred by tax issues and concerns about quality of blocks on offer.
Deterred by tax issues and concerns about quality of blocks on offer
NEW DELHI: Western oil firms were lukewarm to India’s latest licensing round that closed on Monday, deterred by tax issues and concerns about quality of blocks on offer, top executives and officials said.
Foreign firms were put off by India’s move to offer tax concessions to companies that discover oil, but no such incentive is offered for gas discoveries.
“There is no logic in having different terms for oil and gas discoveries,” BP’s exploration director for South Asia, Jonathan Evans, said after submitting bids for two deep-water blocks in partnership with Reliance Industries.
Two days before the deadline for submitting bids, the oil ministry issued a statement saying that the difference in taxes for oil and gas discoveries would continue.
This created a very negative sentiment for the exploration round, chairman of state-run Oil and Natural Gas Corp, R.S. Sharma, said on the sidelines of the World Petroleum Congress at Madrid.
“This clarification shows that policy makers in India do not have the basic understanding of the business,” Sharma said, but added that the company had bid for 26 blocks.
BG, which operates fields in India, Chevron, which has a stake in Reliance Petroleum, and Shell and Italy’s ENI, which also has stake in a block, have not bid.
Petroleum secretary M S Srinivasan said Reliance Industries was in the race for seven blocks.
Reliance discovered India’s biggest gas field from a block it won in a previous licensing round, along with its partner, Canada’s Niko Resources. But even Niko Resources has bid for only one block this time.
“There is no clarity in taxation and prospectivity is also an issue,” Larry Fisher, country manager, India, Niko Resources, said.
Evans said some of the blocks on offer were too small, and some were “recycled”, making them less attractive than the ones offered in previous rounds of India’s New Exploration Licensing Policy.
India’s upstream regulator, V K Sibal, said there were 181 bids for 45 blocks out of the 57 that were offered.
“Going by the number of bids, what it shows is India is still a good destination. There are new players. Eight to nine first-time bidders are there including BHP Billiton and Mittal,” he said.
Exploration blocks that were more likely to have natural gas, which does not get tax concessions, did not attract many bids.
“There is less response, lukewarm response to the gas-prone areas,” Sibal said.
Another official said 19 of the blocks attracted only one bidder each.
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