1. New Hydrocarbon licensing policy: Government expects no fireworks

New Hydrocarbon licensing policy: Government expects no fireworks

As the new Open Acreage Licensing Policy under the Hydrocarbon Exploration Licensing Policy will be rolled out on July 1, the government expects the initial response to be tepid.

By: | New Delhi | Published: June 8, 2017 7:16 AM
Open Acreage Licensing Policy, new Open Acreage Licensing Policy, oalp, new oalp, Hydrocarbon Exploration Licensing Policy, help, Hydrocarbon Licensing Policy Some foreign energy giants recently met Indian government officials to ascertain the benefits of the new policy

As the new Open Acreage Licensing Policy (OALP) under the Hydrocarbon Exploration Licensing Policy (HELP) will be rolled out on July 1, the government expects the initial response to be tepid. “The initial response will be lukewarm though we expect it to pick up. Contractors will be wait and watch others as these will be the first auctions under the new regime,” said a government official close to the development, requesting anonymity.

Some foreign energy giants have recently met Indian government officials to ascertain the benefits of the new policy. Unlike the New Exploration Licensing Policy (NELP) contracts which were offered under production-sharing contracts (PSCs), HELP will offer a revenue-sharing mechanism under which contractors will have to share revenue from the beginning of the production period. In PSC contracts, explorers could recover costs from successful discoveries first and then pay the government’s share. However, according to another government source, it needs to be seen if explorers will be up to taking these high-risk exploration ventures.

Most of the inquiries the government has received are for the Kutch Basin, Krishna-Godavari Basin, Rajasthan and even Assam fields. Though HELP is an on-tap mechanism of leasing out hydrocarbon fields, the first set set of applications will be accepted till the beginning of November 2017 and the auction process will be over by March 2018. Meanwhile, starting January 1, 2018, fresh expressions of interest will be called for the next lot of auction. The government is also looking for a knowledge partner for the auction process and the winner is expected to be finalised shortly.

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The National Democratic Alliance government wants to reduce the country’s dependency on energy imports by 10% by 2022 but a stagnant domestic output remains a hurdle. The country at present imports 40% of its natural gas and 80% of its crude oil requirements. According to the government source quoted above, declining old fields, little success with new discoveries and an unfriendly exploration regime are the limiting factors.

HELP, which was brought in 2016, and OALP, which was soft-launched earlier this year by petroleum minister Dharmendra Pradhan, address the issues which led to the limited success of NELP, said the source. OALP allows on-tap bidding and exploration of all hydrocarbons in a block. It will also allow pricing and marketing freedom for new gas production from difficult areas. However, here too the price is subject to a formula-based ceiling and the current notified price from such difficult blocks is $5.3 per unit.

There are 26 unexplored sedimentary blocks, details of which have been released by the government, which explorers can access before seeking petroleum-production licence. OALP will also offer reconnaissance survey contracts under which a contractor can apply for survey of a particular area only. Post survey, contractors can exit the area by sharing data with the government, which will then include it in the pre-bid document of that particular area for auction. The winner of the auction for that particular area will have to pay for the data directly to the surveyor. In case the surveyor bids for the same area, it will get a few preference points.

“Though the government will not receive any money from the surveyor, it will be able to build database of these unexplored areas,” said the first official quoted above.

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