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In a move that is meant to attract investments in India’s oil and gas exploration sector, the government has said that in assets where income is below $2.5 billion, annually, it will not take revenue share.
The government had recently come out with revised norms for hydrocarbons exploration. At a press conference, Minister for Petroleum & Natural Gas Dharmendra Pradhan said, “In case of windfall gain, the contractor would be sharing revenue with the government on a graded scale ranging from 10 per cent to 50 per cent on incremental revenue over $2.5 billion in a financial year.”
But, royalty and statutory levies will be paid by the contractor. At present, Pradhan said that there are only two blocks — Vedanta’s Rajasthan Block and ONGC’s Mumbai High — where revenues exceed $2.5 billion every year.
Meanwhile, ONGC and Oil India are likely to offer 66 of their explored oil fields to private companies for enhancing domestic hydrocarbon production. The auction can now be done exclusively on the basis of the proposed exploration work programme without any revenue or production share to the Centre.
“These 66 fields are likely to be bid out by the public sector oil exploration companies within 6 months,” a top official in the Ministry of Petroleum and Natural Gas told BusinessLine .
“For unallocated or unexplored areas of producing basins (Category I basins), the bidding will continue to be based on revenue-sharing basis but with more weightage to work programme (70 per cent weightage to work programme and 30 per cent weightage to revenue share). An upper ceiling of 50 per cent on biddable revenue share at Higher Revenue Point has also been prescribed,” the statement said.
The policy also provides for shorter exploration period, three years for onland/shallow water blocks and four years for deep water blocks, the statement added.
According to the statement, the revised policy also incentivises early production through concessions in royalty payout. The contractor will also have full marketing and pricing freedom for crude oil and natural gas to be sold at arm’s length basis through transparent and competitive bidding process.
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