Consultancy Fees Confuse Nelp Panel

A committee appointed by the ministry for petroleum and natural gas to select a consultant for organising road shows abroad for the New Exploration Licensing Policy (NELP) is confused over the differences in the fee being quoted by the consultancy firms. The quotations vary from $ 120,000 to $ 26,000.

In view of this, the committee could not choose a consultant and has left the decision to petroleum secretary T S Vijayaraghavan.

In its report submitted to the petroleum secretary yesterday, the committee, comprising financial adviser in the petroleum ministry, Ravi Saxena, joint secretary in charge of exploration, Shivraj Singh, and director general of hydrocarbons, Avinash Chandra, has pointed out the merits and demerits of various consulting firms. The committee has requested the secretary to take a decision in the light of the facts brought out by the committee.

The consultancy firms bidding for the job include Western Geophysics, Petroconsultants and Arthur Andersen.

Officials are encouraged by the response of some prominent oil multinationals. They say the ministry has been receiving an increasing number of inquiries regarding the new policy ever since the Cabinet cleared the proposal to issue an ordinance for giving effect to the provisions of the Oilfields (Regulation and Operation) Amendment Bill for operationalising NELP. Forty-eight exploration blocks are expected to be offered under this round.

NELP, which was cleared by the Cabinet of the Deve Gowda government just before its fall, could not make much progress last year since its detractors dubbed it a "sell-out" to foreign firms. They argued that the policy would take away some of the prime acreage held the Oil and Natural Gas Corporation and Oil India Ltd (OIL) and offer them to foreign companies.

Officials said both ONGC and OIL would get international prices for new oil discoveries under the revised policy. Till now only private exploration companies have been getting global prices for their oil.

Under this policy, royalty payments will be fixed on an ad valorem basis instead of the present system of specific rates. Royalty payments for exploration deep waters will be charged at half the rate for offshore areas for the first seven years after commencement of commercial production.

The policy also allows freedom for marketing crude oil and gas in the domestic market and provides for a seven-year tax holiday after commencement of commercial production for blocks in the northeastern region. ONGC and OIL will get the same duty concessions on import of capital goods under the new policy as private companies.

Cess levied under the Oil Industry Development Act 1974 has been abolished for the new exploration blocks and a separate petroleum tax code will be put in place to facilitate new investments.

The main objection of the detractors has been that the policy will hit both ONGC and OIL hard. The government has said that it has provided the two national oil companies with a level playing field by offering international prices for the crude oil discovered by them.

But detractors pointed out that the loss of prime exploration acreage currently held by these two companies could be much more than the gain from higher prices.