Energy firms such as ONGC, Oil India Ltd, Jubilant Energy and Assam Company have urged the government to include oil and gas exploration and production (E&P) business in the list of industries getting fiscal incentives in the North East.
The North East Industrial and Investment Promotion policy (NEIIP) provides for fiscal incentives to industrial units in the region but "inadvertently" excluded E&P, former chairman of ONGC and Ficci hydrocarbons committee chairman RS Sharma said.
"Certain industries are in the negative list of NEIIP including `petroleum oil or gas refineries'. But, refineries should not be confused with E&P. Hence this anomaly needs to be corrected," Sharma said.
It appears that the intent of the policy was to exclude oil refinery from availing incentives. But due to the ambiguous language, it is being misinterpreted as to exclude crude oil and natural gas produced by upstream companies, Ficci director general Arbind Prasad wrote to secretaries in the Ministry of Development of North Eastern Region and the Department of Industrial Promotion & Policy.
"To further clarify, there is no concept of gas refineries. The gas industry is only involved in exploration and production of gas," Prasad said.
The North East region has huge hydrocarbons potential and an unambiguous fiscal incentive package would attract investments, Ashu Sagar, secretary general, Association of Oil & Gas Operators said. According to industry estimates, the region has about 5.75 billion barrels of oil reserves and more than 21 trillion cubic feet gas. According to the oil ministry, the Assam-Arakan basin is highly prospective that covers an area of 116,000 Sq. Km.
"Members of AOGO will soon approach the oil ministry, urging it to help E&P companies in getting the NEIIP benefits," Sagar said.
Many companies operating in the region are considering investing in setting up small liquefied natural gas plants provided they get some fiscal incentives, a senior executive of state-run oil company said.
The policy was launched in 2007 to provide 10-years fiscal incentives that included 100% income tax and excise duty exemptions. The policy also provides capital investment and interest subsidies. Its benefits also include reimbursement of insurance premium. But industries in the negative list are not eligible for these incentives.
Oil was discovered in the Digboi oilfield, upper Assam about 100 years ago. Subsequently, the Nahorkatiya, Moran and Rudrasagar oil fields were discovered between 1953 and 1960. Now over 100 oil and gas fields are located in the region including Jorajan, Kumchai, Hapjan, Shalmari, Lakwa, Lakhmani, Geleki, Amguri, Charali, Borholla, Khoraghat, Baghjan and Dirok.