Government taking up the long-pending issues in the oil and gas space, approved a new policy for their exploration and also defined the norms for pricing of existing and new discoveries made in difficult areas. The Cabinet Committee on Economic Affairs (CCEA), while approving the Hydrocarbon Exploration Licensing Policy (HELP) said that the new oil and gas exploration policy will be based on a revenue-sharing model, as opposed to cost-and-output-based norms earlier.
HELP will require companies to acquire just one licence to manage all kinds of hydrocarbon reserves such as oil, gas, shale and coal bed methane and companies will be able to freely price gas, carve out blocks of their choice for exploration, share revenue, not profit with the government, and won't need a Comptroller and Auditor General (CAG) audit of their oil and gas fields. Explorers will also be free to bid for an area of their choice instead of waiting for the government to carve out blocks and auction them. The difficult areas for which the new pricing norms have now been formulated are defined as those from deep-water, ultra deep-water and high pressure-high temperature areas. Such areas were not considered when prices were fixed for normal gas discoveries in 2014.
The petroleum minister Dharmendra Pradhan while describing the new policies as 'global models', said that resources worth more than Rs 261,000 crore will be brought into production as the result of the decisions and the decisions will also go a long way in generating employment, enhance transparency and reduce administrative discretion. The biggest boost to the industry will come from the marketing and pricing freedom for gas from deepwater, ultra-deepwater and high pressure, high temperature blocks.
The Cabinet also approved extending licences of 28 small-and medium-sized oil and gas fields. Production sharing contracts (PSCs) have been extended till economic life of the asset. PSCs for as many as 28 fields, including western offshore Panna/Mukta and Tapti oil and gas fields operated by BG Group of UK, were due for extension. The ministry, based on recommendation of a committee headed by the then additional secretary and financial adviser S C Khuntia, had drawn up a draft extension policy that stipulated an increase in royalty as well as the government's profit share from the fields. This apart, the cabinet cancelled the award of the Ratna and R-Series field in 1996 to a consortium of Essar Oil and Oil Pacific UK.
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