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Companies can hold one licence to manage all hydrocarbon reserves |
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NEW DELHI: 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 under a new hydrocarbon policy expected to boost transparency and attract global majors to the sector.
The Hydrocarbon Exploration and Licensing Policy (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. "The NELP (New Exploration Licensing Policy) policy was criticised by many for being of 'No Help'.
Therefore, we have brought a replacement called HELP," said Oil Minister Dharmendra Pradhan, referring to the inadequacies of the policy that governed oil and gas fields for nearly two decades but wasn't a terrific success.
Big exploration and production companies, which have a longterm outlook on oil prices, would be keen to participate in the exploration sector in India, said Raghu Yabaluri, director at Deloitte.
"The combination of a unified licensing policy which provides access to all hydrocarbon resources, open acreage which helps operators to choose specific blocks where they have competitive advantage and pricing freedom will definitely create lot of global interest in the relatively unexplored Indian basins," he said.
The new policy lifts all restrictions on choosing the buyer or the price at which producers could sell gas, a big shift in policy that caters to a longstanding industry demand. The exploration blocks awarded under the new policy will take about eight to 10 years to start producing, by when the domestic gas market would have already developed, said an official, adding that the current restrictions stem from imperfections in the local gas market.
"It demonstrates the government's firm intent to transform the oil and gas sector and enhance import substitution," said BP Plc, which has a 30% stake in several fields managed by Reliance Industries in the country.
The policy uses a revenue-sharing model to replace the prevalent practice of contractors sharing profit with the government after recovering costs, resulting in several controversies and legal disputes. The new model will reduce the possibility of micromanagement by the government.
"Revenue sharing will mean lesser intervention from the government and that would help companies to worry less about the government and focus more on the operation," said ONGC chairman DK Sarraf. The new policy also allows for a graded system of royalty that reduces rates with rising exploration difficulty in the oil and gas fields. The royalty for onshore fields remains unchanged but the rates for offshore areas have been lowered compared to that provided under NELP. No cess or import duty would apply on the blocks awarded under the new policy.
A company will have the option of informing the government about its interest in exploring a block based on the official hydrocarbon data. Following this, the government will put up the block for auction, in which the bidder offering the highest share in revenue to the government will get it.
Source : economictimes.indiatimes.com
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