With a view to ramping up production from ageing hydrocarbon fields, the Cabinet on Wednesday approved a policy to incentivise enhanced and improved recovery (ER/IR) methods for oil and gas, and unconventional hydrocarbons (UHCs). Explorers who deploy such techniques on oil fields will get a rebate of 50% on cess and gas fields will get 75% rebate on royalty payment to the government. Addressing the media, petroleum minister Dharmendra Pradhan said if 5% of oil and gas production increases from the existing fields, in the next 20 years the country will be able to get additional resources to the tune of Rs 50 lakh crore.
While all hydrocarbon fields offered across regimes —nomination era, pre-New Exploration Licensing Policy (Pre-NELP), NELP, Discovered Small Field Policy and Hydrocarbon Exploration Licensing Policy — will be covered under the programme, fields which are already using ER techniques are unlikely to be eligible. ER includes techniques used to boost production of existing oil and gas fields. These techniques are crucial for India given its falling production and increased dependence on hydrocarbon imports despite Prime Minister Narendra Modi’s call to reduce them. “The policy, having a sunset clause, will be effective for 10 years from the date of its notification.
However, the fiscal incentives will be available for a period of 120 months from the date of commencement of production in ER/UHC projects. In case of IR projects, the incentives will be available from the date of achievement of the prescribed benchmark. Defined timelines have been prescribed to complete the various processes under the policy,” said a government release. As reported by FE earlier, as per the Directorate General of Hydrocarbon (DGH) estimates, though there will be a loss of $3.6 million per annum to the Centre due to cut in share from profit petroleum or revenue-sharing because of implementation of the policy, it stands to gain around $387 million and the states around $212 million per year.
This is even if the recovery rate of remaining in-place volume goes up 5% in case of oil and 3% in case of gas in the next 20 years, resulting in additional oil production of 120 million tonne and additional gas production of 52 billion cubic metre. “In the country, all the existing oil fields — which are mostly nominated ones — are ageing, leading to a fall in production and oil recovery rate. It can only be enhanced if fresh capital is deployed,” Pradhan, said, adding that the new policy will bring investments and new technologies.
An ER committee with officials from the petroleum ministry, DGH and external experts will be constituted, which will review and approve proposals made by contractors. Welcoming the move, Sudhir Mathur, chief executive officer, Cairn Oil & Gas, Vedanta, said: “This is yet another progressive decision under the leadership of Dharmendra Pradhan and the ministry of petroleum and natural gas to spur the growth of the Indian oil and gas industry. This policy will attract much-needed investments and usher in a wave of best-in-class technologies to improve India’s hydrocarbons recovery.”