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Companies in the oil and gas exploration and production business want the government to incentivise Enhanced Oil Recovery (EOR) measures to boost output.
Industry players who spoke to BusinessLine have proposed a floor price for crude oil and greater revenue or production share from the incremental crude oil recovered. EOR is an umbrella term ascribed to techniques for increasing the amount of recoverable crude oil.
Incentives have been sought as implementation of EOR escalates the cost of production.
Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas, had said, “Fiscal incentive should not be the only reason for adopting Enhanced Oil Recovery technologies, the government will come out with a policy for EOR after consultations with the industry.”
The government recently awarded discovered hydrocarbon assets to players for monetisation under a revenue-sharing model wherein the contractor has to share the profits from first day of production.
Dharam Singh Rajput, Managing Director at Dubai-based South Asia Consultancy, said, “In order to encourage EOR, the government can offer 50 per cent of the incremental revenue after these techniques to the operator. This would allow more production from the reserve, and higher revenues for both the operator and the government.”
His firm has bagged a block in the recently conducted Discovered Small Field Auction (DSF).
The industry has proposed that a floor price on the sale price of crude oil obtained after EOR can be fixed.
P Elango, Managing Director at Hindustan Oil Exploration Company, said, “The government can assure a fixed price of $60 a barrel on all crude oil recovered after EOR. If the price of crude oil is hovering near $50 a barrel, the government or the public sector oil marketing company can pay the balance to the block operator. This will assure a fixed return to the operator, encouraging investments in EOR.” HOEC has bagged participating interest in two blocks after the DSF auction.The Federation of Indian Petroleum Industry, a body representing the oil industry in India, has asked for fiscal incentives for EOR.
In its suggestions, FIPI has recommended a reduced rate of royalty and cess exemption for incremental production from EOR.
While the state governments gain royalty from on-shore blocks, the Centre claims stake over royalty from off-shore blocks. Cess is collected for the development of the oil industry by the Centre.
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