A total of ten blocks offered under the New Exploration Licensing Policy (NELP) IX face the axe as the Empowered Committee of Secretaries (ECS) has recommended not to award them due to lower profit petroleum to the government. The ECS has also cleared 14 blocks to the first ranked/single bidder, even as some blocks continued to face Defence hurdles and legal complications.
The ECS, at its meeting held on February 16, took up the 74 bids for the 33 blocks offered under the already delayed NELP IX round, and recommended to award 14 blocks to highest bidders. It recommended axing of highest ranking bids in the case of 10 blocks where the offer to the Union Government was less than 15 per cent net present value (NPV) of profit petroleum.
Among the bids that could be impacted by this decision include companies such as Reliance Industries Limited (RIL), Oil and Natural Gas Corporation (ONGC), Oil India Limited, Hindustan Petroleum Corporation Limited (HPCL), Bharat Petro Resources Limited and Indian Oil Corporation.
The blocks recommended for award by the ECS include two shallow water and 12 onland blocks. It rejected bids for seven deep water blocks and three shallow water blocks. In the case of eight blocks, two await clearance of the Defence Ministry. In the case of bids by Prize Petroleum Company Ltd, the matter has been referred to the Ministry of Law and Justice for legal opinion. In the case of Ishar Gasoil Pvt Ltd for blocks Cb-ONN-2010/2, Rj-ONN-2010/1 and GV-ONN-2010/1, the matter has been sent to the Ministry of Corporate Affairs for its opinion.
For the blocks MB-DWN-2010 and MB-OSN-2010/2, the clearance from the Ministry of Defence is being awaited and the ECS directed that the issue be taken up again at the highest level. At a meeting held with the Defence Ministry on January 1, and subsequently, February 8, the issue was discussed but there has been no response as yet from the Ministry.
The ECS also rejected Essar Oil's bid for the CB-ONN-2010/11 block despite the company scoring the highest points and having the required minimum net worth of $19.42 million. However, the bid was not considered as the net worth furnished by the bidder, at $142.90 million, included an amount of $256.84 million for advance towards “global depository shares”. Removing advance for GDS resulted in negative net worth of $113.94 million. Essar Oil furnished on January 10, opinion from Deloitte Haskins and Sells saying that bank guarantees and letter of credit were not considered for computation of net worth. The amount involved as on March 31, 2010, was $1369.46 million. However, the ECS said as per the Companies Act, 1956, Part I of Schedule VI, share application money and money received against share warrants are not part of the paid-up capital/share capital.
“Essar Oil submitted its bid for the block in its individual capacity, with 100 per cent participating interest without any parent company financial and performance guarantee. The documents submitted by Essar Energy plc on October 18, 2011, are submitted after the bid closing date, March 28, 2011.
It also rejected bids by Deep Energy, LLC and KGN Oil and Gas Pvt Ltd for the block CB-ONN-2010/1. Chinar Commerce Pvt Ltd bid was also rejected for CB-ONN-2010/6 and CB-ONN-2010/7 blocks and it recommended that award of block CB-ONN-2010/7 not be awarded as no other bid has been submitted.
