The petroleum ministry today put up a draft of a new oil and gas exploration and development policy for public consultation inviting comments on key provisions including a switch to revenue sharing model of development, open acreage system and uniform licensing of blocks.
The move comes within a month of the announcement of the marginal fields policy with similar provisions for the oil and gas sector and puts to rest speculations on whether that policy for marginal fields was meant to test the ground for rolling out revenue-sharing for all oil and gas blocks.
“The government proposes to award future acreages under a new fiscal and contractual regime. Some of the fundamental changes proposed under future awards are Uniform Licensing Policy (ULP), Open Acreage Licensing Policy (OALP) and Revenue Sharing Contract (RSC),” the ministry said in the consultation paper. The ministry did not share details of the investment boost expected from the new policy. Union Petroleum Minister Dharmendra Pradhan also refused to comment.
Under the existing cost-recovery regime, companies win blocks by quoting the highest Minimum Work Programme (MWP) and recover investments before sharing profit with the government. This model was criticised by the Comptroller and Auditor General of India (CAG). Under the new revenue sharing model, companies will have to indicate the revenue they will share with the government at different stages of production and under different price scenarios.
The OALP will allow companies to submit bids for exploration areas of their choice. The upstream regulator will apply its own geological date to authenticate the expression of interests (EoIs) submitted by companies for an area and carve out the block. This will be followed by invitation of bids from all interested parties.
The third key provision of uniform licensing will allow companies to explore and extract all hydrocarbon resources covered under the regulations under a single Petroleum Exploration License (PEL). “The uniform license will enable the contractor to explore conventional and unconventional oil and gas resources including Coal Bed Methane (CBM), Shale Gas, Gas Hydrates and any other resource,” the consultation paper said.
On the lines of the marginal fields policy notified on 14 October, the consultation paper has also proposed providing pricing and marketing freedom for natural gas to be produced from areas to awarded under the new contractual and fiscal regime.
Experts gave a thumbs-up to the new proposed regime. “If accepted as it is proposed, with the right to companies over all hydrocarbons and pricing and marketing freedom, the new fiscal and contractual regime will prove to be a game changer for India’s exploration and production sector,” said Debasish Mishra, Senior Director at Deloitte. “The current low oil price scenario may not be a significant dampener as large oil companies take into account a 30-40 year time frame while bidding for acreages,” he added.
The ministry has asked stakeholders to submit comments on the modalities for operationalising OALP, weightage of the mandatory work programme in bid evaluation and ways to further incentivize exploration of unconventional resources.
