Centre steps on pedal for oil, gas exploration; gives LPG for poor

Giving a much-needed fillip to the oil sector, the Centre on Thursday announced a slew of proposals, including differential gas pricing, a new hydrocarbon policy, extending contracts for small and marginal fields, and providing domestic cooking gas connections to below-the-poverty line families.

The beneficiaries are mainly private explorers such as Reliance Industries and Cairn India, as well as state-owned ONGC and Gujarat State Petroleum Corp.

The Cabinet has allowed pricing and marketing freedom to explorers operating in undeveloped and difficult areas — deepwater, ultra deepwater, and high pressure, high temperature fields. But this comes with a rider; the government has decided to cap the price to protect consumer interest. The price, which will be based on the weighted average landed price of fuel oil, coal and naphtha, or LNG, will take the rate of the fuel that is the lowest.

The policy will be applicable to future discoveries as well as existing finds that had not started commercial production as on January 1, 2016. At the current prices of these fuels, gas from such fields would be available at $7 a unit (million British thermal units).

Private sector players reacted cautiously to the ‘incentives’, while their public sector counterparts like ONGC believed that this “will give a new lease of life” to the sector. ONGC is itself gearing up to start activity in its east coast block adjacent to RIL’s KG-D6.

The Cabinet also approved the Hydrocarbon Exploration Licensing Policy, which will provide a uniform licence for exploration and production of all hydrocarbon forms. On the lines of the National Exploration Licensing Policy, it will provide marketing and pricing freedom for the crude oil and natural gas produced, and work on the revenue-sharing model.

Production-sharing contracts The Cabinet Committee on Economic Affairs also cleared a policy to extend the Production Sharing Contracts for 28 small- and medium-sized discovered fields. According to official estimates, this will help monetise 15.7 million tonnes of crude oil and 20.6 million tonnes of oil equivalent gas.

According to an official release, “The government’s share of profit petroleum during the extended period of the contracts would be 10 per cent higher for all the fields, resulting in an additional revenue of ₹2,890 crore.” By other decisions, the CCEA revisited a 20-year-old order and returned Ratna and R-Series fields on the west coast to ONGC. “ONGC will take up production on behalf of the government and will share the profits and royalty with the government,” said Oil Minister Dharmendra Pradhan.

The CCEA also approved the provision of ₹8,000 crore over the next three years for the Pradhan Mantri Ujjwala Yojana that would provide LPG connections at a concessional rate to five crore below-the-poverty-line families.

The Cabinet gave its nod to amend the Mines and Minerals (Development and Regulation) Act to allow transfer of captive mining leases issued before January 12, 2015, in the case of mergers and acquisitions. It is expected to be tabled in Parliament in the ongoing Budget Session.

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