IOCs to receive corporate tax exemption, right to sell gas to 3rd party
A move is underway to exempt the International Oil Companies (IOCs) from giving corporate tax in an effort to make the country’s deep sea block bidding more lucrative.
Under the move, an option is also being introduced in the model production sharing contract (PSC) to allow IOCs to sell their portion of the produced gas to a third party, official sources said.
At present, there is a mandatory provision in the model production sharing contract (PSC) prepared for the ‘Bangladesh Offshore Bidding Round 2012’ that if an IOC wins a gas block, it will pay corporate tax at the rate of 42 percent. This is applicable for both the deep sea and shallow sea blocks.
But now the government has taken the move to keep it mandatory only for the shallow sea blocks and exempt it for the deep sea blocks. “This means those IOCs that will win deep sea blocks won’t require to pay the corporate tax,” said an official.
Petrobangla will rather pay the corporate tax on their behalf. The existing PSC has the similar provision.
About the option for selling gas to a third party, the sources said, any IOC will be allowed to sell up to 50 percent of their portion of produced gas to any third party within the country when the change will be brought in the model PSC.
But the existing provision of the Model PSC 2012 allows the IOC to sell gas to a third party only if Petrobangla refuses to buy it.
Petrobangla had floated international bidding both deep sea and shallow sea blocks. But last week it received bids from IOCs only for the country’s shallow sea blocks.
Sensing a poor response, it postponed the bidding about deep sea blocks to introduce the new changes in the model PSC.
About the latest move, Petrobangla chairman Dr Hussain Monsur said the government is changing the provisions to make the bidding for the deep sea blocks more “attractive”.
“Due to the existing provision for mandatory corporate tax, many IOCs are found to be reluctant to participate in the bidding. But after the change, we hope they will feel more interested,” he said.
The Petrobangla Director (PSC), who is dealing with the international bidding affairs, said the new change is awaiting clearance from the Law Ministry.
“Once the Law Ministry’s clearance is found, it’ll be placed before the Economic Affairs Committee for the government’s final nod,” he added.