The cabinet committee on economic affairs (CCEA) is likely to take up a proposal for the auctioning of 69 small and marginal fields surrendered by PSUs ONGC and Oil India (OIL) on Wednesday.
The ministry of petroleum and natural gas, sources said, has proposed to offer explorers ‘market price’ for natural gas to be produced from these smaller oil and gas fields. In addition to the market price for natural gas drilled from these marginal fields, explorers would also be offered some tax sops and the contract would be based on the revenue-sharing model, an official added.
This is in keeping with the Narendra Modi government’s strategy of plucking low-hanging fruit first when it comes to augmenting the country’s oil and gas output.
In order to make these fields attractive, an explorer bidding for the marginal fields on offer would be allowed to combine multiple fields and develop them as a cluster. At the same time, if any of the auctioned marginal fields is in the vicinity of existing assets of any firm, it would be allowed to prepare a development plan in parallel with its old asset.
The petroleum ministry is believed to have extensively included inputs from private explorers such as Reliance Industries (RIL), BP and Cairn India, among others, to make the policy remunerative and attract investments during the auction. On May 7, an interactive session was organised by the committee on hydrocarbons of industry body CII in New Delhi, where private energy companies discussed issues including the auction of marginal fields with petroleum minister Dharmendra Pradhan, petroleum secretary Kapil Dev Tripathi and other top officials of the ministry, who play an important role in unveiling policy decisions. The explorers could determine the market price for the specified volumes of natural gas produced from these marginal fields by calling bids from buyers. It would show the rates market is willing to pay. Currently, a few fields of ONGC, which are not connected to the gas grid, adopt this model for sell of gas.
In the revenue-sharing mechanism, explorers would need to pay the government a predetermined amount from Day 1, based on production levels at the block.
* Proposal for auction of 69 small and marginal fields
* Explorers to get market price for natural gas
* Auction model drawn after extensive discussion with explorers
* Contract to offer revenue-sharing model
* Explorer to be allowed to club fields & develop as cluster