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ONGC seeks upstream tax relief
FINANCE & INVESTMENT
INDIA’S state-run Oil and Natural Gas Corp. (ONGC) has reportedly appealed to the gov- ernment for tax relief as its core business comes under pressure from the oil and gas price crash.
ONGC asked the government in March to abolish the 20% ad-valorem oil industry development (OID) duty on realised oil prices below $45 per barrel, local newswire PTI quoted unnamed sources as saying on April 6.
While the OID levy only applies to oil pro- duced from nominated and pre-NELP explo- ration blocks, the majority of the country’s crude output comes from such fields. ONGC and state-run Oil India Ltd (OIL) pay the tax on fields that were nominated to them, while Cairn India pays the same tax on oil produced from its Rajasthan block.
PTI’s sources siad that ONGC had also requested that its royalty payments from onshore production to state governments be halved from the current 20% of realised prices. Such a cut would also apply to OIL.
ONGC is understood to be on track to lose money from both the oil price collapse as well as the government’s decision to slash prices for
locally produced conventional gas to $2.39 per mmBtu ($66.11 per 1,000 cubic metres).
The sources said ONGC was also looking for the government to scrap the pricing formula for domestically produced natural gas, which is making the development of some fields une- conomical. The comments echo those made by ONGC chairman Shashi Shanker at the start of the month, when he said marketing freedom was necessary to avoid certain projects from being mothballed.
New Delhi sets domestic gas prices every six months using the weighted average price of gas in hubs in the US, Canada, the UK and Russia. These prices are also set at a three- month lag to prevailing market rates in those hubs and come with a built-in $0.50 per mmBtu ($13.83 per 1,000 cubic metres) dis- count to the international average.
The newswire said ONGC had told the gov- ernment that the current tax rate could affect its planned capital expenditure programme. The sources added that ONGC’s fields were past their prime and that it would be a “big, big mistake” to expect production to remain stable without investment.™
IOC awards Barauni refinery upgrade contract to L&T
PROJECTS & COMPANIES
STATE-RUN Indian Oil Corp. (IOC) has awarded international engineering company Larsen & Toubro (L&T) a contract to expand the capacity of the Barauni refinery in the east- ern state of Bihar.
While L&T did not reveal the value of the contract it did say that it was con- sidered “large”, which by the company’s definition means it is worth INR25-50bn ($327-654mn).
Under the terms of the award, subsidiary L&T Hydrocarbon Engineering will provide engineering, procurement, construction and commissioning (EPCC) services to set up a 9mn tonne per year (180,000 barrel per day) atmospheric and vacuum distillation unit (AVU) and connected facilities. The AVU will replace the refinery’s three exist- ing AVUs, which have a combined capacity of 6mn tpy (120,000 bpd).
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w w w . N E W S B A S E . c o m Week 14 09•April•2020