Government signs contracts for 32 hydrocarbon blocks under OALP

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Published: July 17, 2019 4:05:01 AM

HELP’s hallmarks are single licence for exploration of all forms of hydrocarbons (including shale gas and CBM), a simple revenue-sharing model, and marketing and pricing freedom for the developers.

Government, contract, hydrocarbon block, OALP, Oil India, Vedanta , ONGC , Indian Oil Corporation, HELP, Hydrocarbon Exploration Licensing Policy, Dharmendra Pradhan, economy newsUnder HELP, blocks are awarded to those companies that offer the highest share of revenue to the government.

The government on Tuesday signed revenue-sharing contracts for 32 hydrocarbon blocks offered under the Open Acreage Licensing Policy (OALP) Rounds II and III, adding 60,000 square km to India’s exploration map. State-run Oil India has won 12 blocks under the two rounds, followed by Vedanta (10), ONGC (8) and Indian Oil Corporation (1).

Reliance Industries, along with its foreign partner BP, has also got a hydrocarbon field after a gap of 11 years, as it last won in 2008 under the New Exploration Licensing Policy. OALP is a critical part of the March 2016-launched Hydrocarbon Exploration Licensing Policy (HELP).

“More production of oil and gas in the country is the priority of the government. With these contracts, more than billions will come to India’s exploration sector,” said petroleum and steel minister Dharmendra Pradhan. There were eight onland, five shallow-water and one ultra-deepwater blocks under auction for OALP-II, a total of 14. Under OALP-III, out of the 23 blocks, 19 are on land (including five coal-bed methane), three in shallow water and one in deep water. No bids were received for five blocks under Round III.

Bids came in for 32 blocks out of the 37, but none for the coal-bed methane blocks which were carved out by the Directorate General of Hydrocarbons and put up for auction. In the first round of OALP, Vedanta — operator of the prolific Barmer field in Rajasthan — bagged 41 out of the 55 hydrocarbon blocks.

HELP’s hallmarks are single licence for exploration of all forms of hydrocarbons (including shale gas and CBM), a simple revenue-sharing model, and marketing and pricing freedom for the developers. Under HELP, blocks are awarded to those companies that offer the highest share of revenue to the government. However, the government was forced to dilute the revenue-sharing model for hydrocarbon exploration two years after its launch.

In several cases, irrational bidding, quoting very high revenue share to the government, even above 90% at the peak production level during the contract period, had raised serious concerns of back-loading of production. It was suspected that in case of Category 1 fields with proven reserves, companies were bidding aggressively on revenue share to get hold of the assets but were slow on development plans, frustrating the government’s objective of stepping up domestic production of oil and gas. The revised revenue-sharing model will be applicable from the fourth round of OALP.

India has 26 sedimentary basins divided into three categories: Seven in the first category where commercial productivity has been proven, whereas five in Category II and 14 in Category III don’t not have proven commercial productivity.

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