The Hindu Business Line : Exploration policy: Govt will define past performance criteria

New Delhi March 29 Learning from experience, the Petroleum Ministry is working towards fine-tuning the fiscal package and clearly defining the past performance criteria for the seventh round of New Exploration Licensing Policy (NELP-VII).

The Ministry plans to put on offer 80 oil and gas blocks, of which about 34 are to be offshore and remaining on land, sources told Business Line.

The seventh round is likely to be launched towards the end of April. In order to send positive signals to investors and offer best package under the production-sharing contract (PSC), the Ministry has been seeking views of the industry to address the issues of profit petroleum — the Government share of profit — and past performance, which were raised during the last round (NELP VI).

consensus

Sources said a general consensus among the industry players is that the profit-sharing contract should clearly define the profit-sharing mechanism, even if it is on the higher side.

"We have had three-four interactions with the industry players as well as the apex chambers. The industry response has been positive on the issue, as they all want clear guidelines," sources added. Declining to comment on whether the fiscal package would stipulate a mechanism where the Government offtake is on the higher side instead of lower share in the later years of production as proposed by certain bidders in the just concluded round of NELP, sources said, "We are in the process of examining the responses and firming up our views, as it is felt that to send a positive signal to the investors it was important to have clearly defined mechanism."

Concerns were expressed by a section of industry over the Government's share of profit petroleum in certain blocks under NELP VI with some bidders offering `extreme financial package' for different blocks. The objection was that the bidders had shown a lower share for the Government in the later years of production. This, in effect, would have meant that if there was an increase in production at a later stage, the Government would lose out on its share of oil and gas from that find.

The issue was around the interpretation of the principle of `sliding scale of the pre-tax investment multiple'. 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.

After deliberations the Government had gone ahead with NELP VI and decided to define the guidelines in the seventh round, as it did not want to send negative signals to the investors of the previous round. The package should be such that it should have incentive for exploration and development activities.

As regards past performance, the Government is working on certain parameters on how to evaluate past performance, sources said.