Govt may slap corporate tax on IOCs

FE Team | Published: July 29, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

M Azizur Rahman
The government is mulling over a plan to slap corporate tax on the international oil companies (IOCs), which will engage in the country's future hydrocarbon exploration, to lessen burden on Petrobangla.
Currently, the IOCs, involved in hydrocarbon exploration and production in Bangladesh, do not pay corporate tax as the state-run Petrobangla pays such taxes to the National Board of Revenue (NBR) for them.
Petrobangla is now paying IOCs corporate tax worth around Tk 4.0 billion every year incurring heavy losses in gas trade with the IOCs.
The company's losses accelerate further as it purchases gas at the rates between US$2.4 and $2.9 per unit (1,000 cubic feet) and sells at $1.5 per unit on an average to the consumers.
On the contrary, the local gas exploration and production companies are not only paying corporate tax to the NBR, but are also paying value added taxes (VAT), supplementary duties and offering deficit financing to the Petrobangla to reduce its losses it incurs on account of gas sales.
The existing production sharing contracts (PSCs) signed between Petrobangla and the IOCs have exempted the IOCs from paying corporate tax, a senior Petrobangla official.
"But in the future PSCs the provision of exempting the IOCs from paying the corporate tax might go as we have already taken a decision regarding this," he added.
The IOCs that will be involved in the future offshore hydrocarbon exploration in the Bay of Bengal might come under the new corporate tax measures.
The government is set to float 'offshore bidding round 2007' soon to explore the hydrocarbon potentials in the Bay.
Currently, the Petrobangla purchases 690 million cubic feet per day (mmcfd) from four operating IOCs, which is 42.9 per cent of the total gas production of 1610 mmcfd.
Four IOCs -- the US oil giant Chevron, Irish Tullow, Scottish Cairn and Canadian Niko -- are engaged in gas production in the country.
The government has, however, eight PSCs with the IOCs for 10 gas blocks across the country.
The government signed these PSCs in the first and second round biddings in 1993 and 1997 after dividing the country into 23 blocks.
Among the IOCs, the Chevron Bangladesh Ltd alone was awarded blocks 12, 13 and 14 covering Sunamganj, Habiganj, Sylhet and Moulavibazar areas.
The Chevron along with the state-owned Bangladesh Petroleum Exploration and Production Company Ltd (BAPEX) was awarded Block 7 for gas and oil exploration in Barisal, Patuakhali, Pirojpur, Jhalkathi, Barguna and the adjacent areas of the Bay of Bengal.
Cairn Energy Exploration Bangladesh Ltd together with the BAPEX was awarded blocks 5 and 10.
These blocks cover Khulna, Satkhira, Bagerhat and the adjacent portion of the Bay of Bengal, Laxmipur, Noakhali, Bhola, Shahbajpur and the adjacent areas of the Bay of the Bengal.
Cairn Energy Sangu Field Ltd and Halliburton Energy Inc were jointly awarded Block 16 for the areas of Feni, greater Chittagong, Kutubdia and the adjacent areas of Bay of Bengal.
Tullow Bangladesh Ltd and Oakland Oil Company were awarded jointly the Blocks 17 and 18 covering the areas of Cox's Bazar and the adjacent area of the Bay of Bengal.
Tullow Bangladesh Ltd, Niko Resources and BAPEX were jointly awarded Block 9, which covers the areas of Gazipur, Narsingdi, Comilla and Chandpur.
Energy and Mineral Resources Division (EMRD) sources said, the block 7 awarded jointly to Chevron and BAPEX, block 17 and 18 jointly awarded to Tullow Bangladesh Ltd and Oakland Oil Company and block 5 jointly awarded to Cairn Energy Exploration Bangladesh Ltd together with the BAPEX are inoperative.