India’s hydrocarbon space will test the patience and policy consistency of the government of the day in the coming years as the country’s exploration policy enters a transition phase.

Life of the New Exploration Licensing Policy (NELP) regime may remain only for the next 10-15 years, as the country’s entire oil and gas exploration as well as production business is shifting to Hydrocarbon Exploration Licensing Policy (HELP)-Open Acreage Licensing Programme (OALP).

In many countries there are multiple models — revenue sharing, production sharing or customised — but these are places where the oil industry plays a dominant role.

In India there are mainly three different categories — nomination basis: areas given prior to auction rounds; pre-NELP and NELP: where areas were given through auctions based on production sharing contracts; and HELP regime — a uniform licensing regime based on revenue sharing model and OALP.

“Yes, all three can co-exist, but the challenge will be in implementation. The government of the day will be under pressure to ensure that there is no interruption in this high risk business due to policy issues,” an oil industry tracker said.

But, the moot point is whether HELP will turn the tides for India in meeting its energy demand. HELP is just taking baby steps and by the time it stabilises it will take, conservatively speaking, a few years, said an analyst. Particularly when with growing consumption, India’s demand is also going to put pressure on the import bill.

According to the Petroleum Planning & Analysis Cell estimates, the crude oil import bill is likely to increase by 27 per cent from $88 billion in 2017-18 to $112 billion in 2018-19 considering actual upto December 2018 and Indian basket (rate at which domestic refiners buy their requirement) crude oil price at $57.77 a barrel and exchange rate at ₹70.73 versus dollar for January 2019-March 2019.

No uniform model

The challenge is that India does not have a uniform licensing model for forming a base. Therefore, what will HELP mean economically, one will have to wait and watch, said an official in the know.

Since NELP was introduced in the late 1990s, 314 blocks have been offered under various auction rounds, of which 254 have been awarded. There are 60 NELP blocks that are operational today by players such as ONGC, Reliance Industries and Oil India. From 2017 all new contracts have been signed under the HELP regime. Although most of the producing blocks in the country, at present, are those that have been offered before NELP or after NELP. All these production sharing contracts have a life.

OALP is a continuous bidding process. In February, the government launched the third OALP bidding round offering 23 blocks. It has contracted for 55 blocks under OALP Bid Round-I. The second round was launched in January offering 14 blocks. The OALP adopts all features of HELP — reduced royalty rates, no oil cess, uniform licensing system, marketing and pricing freedom, revenue sharing model, exploration rights on all retained area for full contract life, among others.

Discovered small field

Parallely the government has been offering areas under Discovered Small Field policy. The second round of DSF is under way with the Empowered Committee of Secretaries (ECS) and Group of Ministers recently giving their nod for the award of 23 contract areas to highest ranked bidders.

“The government is taking measures, but it has to ensure that market flexibility is taken care of and continuity in policy implementation remains. Besides, time taken to bring blocks offered under OALP into production will be at least eight-ten years,” said an industry player.

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