Home > Crude Oil & Petroleum, Natural Gas > NELP IX receives lukewarm response

NELP IX receives lukewarm response

The Indian government received a lukewarm response from oil companies particularly the large global companies like Exxon Mobil and Chevron. It is suspected that long delay in granting government approval to the Cairn-Vedanta deal has kept the foreign companies at bay.

Under Nelp-IX, of the 34 blocks on offer (refer my earlier post), 1 received no bids while another 14 blocks got just one bid. Among the public sector companies, ONGC bagged 10 of the blocks, while Oil India led consortium won three blocks. Reliance Industries successfully bagged two. BHP Billiton and BG Group plc jointly won one block among the international players who bid for the blocks.

Investments in exploration in the oil blocks offered under NELP (I to XIII) have been very low compared to the amount committed. Some attribute this to the low crude producing oil blocks offered by the government under NELP rounds.

Also, under the current income tax laws, definition of mineral oil does not include natural gas, which is another deterrent. However, the seven-year tax deduction which was available on commercial production of mineral oil expires on March 31, 2011. The government has altered the incentive pattern from being profit centric to being investment centric, wherein the incentive will be given on amount of investment made in exploration on these oil blocks. However, lack of clarity in regulatory mechanism is a cause of concern. Hence, changes in investment based incentive failed to attract private participation.

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