Auction of oil, gas fields with Rs 70k-cr reserves from July

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New Delhi | Updated: May 26, 2016 8:12:27 AM

In a pioneering move, the government has put 67 discovered oil and gas fields up for auction with a refreshed and investor-friendly fiscal regime that promises marketing and pricing freedom for the contractors.

In a pioneering move, the government has put 67 discovered oil and gas fields up for auction with a refreshed and investor-friendly fiscal regime that promises marketing and pricing freedom for the contractors.

The fields, comprising 36 offshore and 31 onshore ones, have hydrocarbon reserves of 48 million tonnes of crude oil and 38 billion cubic metres of natural gas, pegged at over `70,000 crore at the prevailing commodity prices. The bids would open on July 15 and close on October 31. The contracts are expected to be signed by January 2017.

An output of 625 million barrels of oil and oil equivalent is expected from these areas. The hydrocarbon output from these fields is expected to commence within three years of awarding the contracts, said petroleum minister Dharmendra Pradhan, adding, “The attempt is to remove policy barriers and introduce global best practices to attract private investment and best technology to maximise domestic production.”

The 46-year-old minister said the auction features policy offering price and market freedom of oil and gas produced; single licence for all kinds of hydrocarbon coupled with attractive revenue-sharing model, which would mean minimum government intervention.

“We will have roadshows on this in various parts of India and abroad in coming weeks and invite existing and new entrepreneurs, particularly the start-ups,” Pradhan said.

The petroleum ministry would hold roadshows in India and overseas, starting June 6 in Mumbai.

The 31 onshore blocks are situated in Andhra Pradesh (8); Arunachal Pradesh (1); Assam (12); Gujrat (5); MP (1); Rajasthan (2) and Tamil Nadu (2).

Unlike the areas auctioned under the New Exploration Licensing Policy adopted by India in 1999, the 67 fields to be auctioned are “discovered” ones, meaning the reserve position is known. The operators could therefore proceed to the development stage straight away without spending time and funds on exploration.

The bidding would take place on two parameters — 80% weightage would be on the revenue the bidders offer to share with the government and 20% on appraisal and development wells. For revenue sharing, the bidders would have to quote two rates — lower revenue point ($0.0100 million/day) and higher revenue point ($1.000 million/day), which would be determined based on production and price of the hydrocarbon. In simple terms, there would a revenue-sharing matrix over the life cycle of the field, which would be directly proportionate to output levels and price. The government has not kept a fixed revenue share because it would not have protected the Centre’s interest in case of any windfall gains, sources explained.

While there would be no cess charged from these fields, for crude oil production, royalty has been marked at 12.5% for onshore, 10% for shallow water and 5% for first seven years for deep and ultra deep water fields. For gas fields, the royalty rates have been decided at 10% for onshore and shallow water, while it would be 5% for deep and ultra deep water.

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