In yet another attempt, Govt tries to make hydrocarbon hunting more attractive

How to increase domestic oil and gas production seems to have been a challenge for the Narendra Modi-led government as was the case with the previous regimes. In what could be seen as yet another attempt at making the exploration business attractive, the government is in the process of implementing the recommendations of a high-level Inter-Ministerial Committee.

The Committee headed by Rajiv Kumar, Vice-Chairman, NITI Aayog, has made several specific recommendations to transform the country’s oil and gas exploration sector. It has submitted its report to the Prime Minister’s Office.

Asked if this will be an all-new policy regime, sources said it should be termed as further liberalising the exploration conditions with measures to enhance domestic production of oil and gas — putting on offer some existing fields owned by PSUs and incentivising ONGC to improve enhanced oil recovery from its existing fields.

Sources in the know told BusinessLine that the focus of the committee has been on how to increase production and not make revenue maximisation an obstruction for production. Simply put, primary weightage will be given to exploration work programme and not revenue sharing as the case is now.

The proposed measures will also help attract more investments in exploration in difficult areas by giving the contractors necessary incentives, a source said adding that for all new discoveries there will be complete gas pricing and marketing freedom.

India’s exploration business has gone through different regimes — blocks given on nomination basis to public sector explorers like ONGC and Oil India Ltd, Production Sharing Contract under New Exploration Licensing Policy (NELP), to Hydrocarbon Exploration Licensing Policy (HELP).

In NELP PSC model, the contractor first recovered the cost before sharing profits with the government — based on Investment Multiple and cost recovery /production linked payment. Blocks were won through auction rounds.

HELP regime replaced it by the revenue sharing model , where the government is not concerned with cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc. HELP also offered a uniform licence that enables the contractor to explore conventional as well as unconventional oil and gas resources under a single licence. Besides, it was done through Open Acreage Licensing Programme (OALP), where players carve out their areas.

As if this was not enough, the Modi-led government also decided to monetise the small and marginal fields given to ONGC and Oil India prior to the auction rounds. Many of these fields could not be monetised for years due to various reasons such as isolated locations, small size, prohibitive development costs, technological constraints, unfavourable fiscal regime, etc. The Discovered Small Field Policy was to help here. But, the results have been far from satisfactory till now, mounting pressure on the government as import dependence for crude oil and natural gas has been a big concern. This was also acknowledged in the Interim Budget.

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