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The Directorate General of Hydrocarbons has proposed a 50 per cent waiver of cess from crude oil and natural gas produced through Enhanced Oil Recovery (EOR) or unconventional oil production project in the draft Policy Framework to Promote and Incentivise Enhanced Recovery Methods.
The waiver will be applicable for 10 years from the date of notification of policy.
The draft has proposed that incentives mentioned in this policy would be applicable across all regime types (nomination, pre-NELP, NELP, DSF and HELP) as well as to the fields which were/will be awarded extension under the pre-NELP, NELP and nomination regimes. The fields need to be having a minimum three years of commercial production to be considered eligible for incentives.
However, fields which are currently producing oil or gas using ER techniques or fields for which Field Development Plan (FDP) has been approved for ER projects before the notification date will not be considered eligible for incentives under this policy.
In contracts where a cess is not applicable, a notional cess shall be calculated, and the equivalent amount shall be reduced from the government’s share of profit petroleum or revenue share.
The waiver on cess, however, would be applicable only if the average crude oil price of Indian Basket during a calendar quarter (quarter of claim) is below $80 per barrel, or the EOR reference price.
This EOR reference price will be notified by an Enhanced Recovery Committee comprising Petroleum Ministry, DGH and other government appointees.
For onshore field, the incentive for Enhanced Gas Recovery and other unconventional gas production projects, there shall be an incentive equivalent to 10 per cent of the gas wellhead price on the gross production of gas from designated well of an approved Enhanced Gas Recovery or unconventional gas production project for a period of 10 years.
The incentive shall be capped at $0.6 per mmBtu (million British thermal unit) for offshore fields and $0.3 per mmBtu for onshore fields, the statement added.
For offshore fields the incentive shall be in the form of waiver of applicable royalty on the gross production of gas from designated well of an approved Enhanced Gas Recovery project.
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