Oilmin plans roadshows abroad to attract investors

By: |
New Delhi | Updated: March 23, 2016 1:09:01 AM

The Narendra Modi government, after announcing a clutch of reforms aimed at giving the much-needed impetus to the country’s under-performing upstream hydrocarbon sector...

The Narendra Modi government, after announcing a clutch of reforms aimed at giving the much-needed impetus to the country’s under-performing upstream hydrocarbon sector, will now hold roadshows at global destinations  to attract investors.

Sources told FE that the roadshows will be aimed at improving the perception about India’s hydrocarbon industry and apprise the global investors of the government’s efforts at improving the ‘ease of doing business’.

“Nearly 28 decisions for the oil and gas sector have been taken by the CCEA (Cabinet Committee on Economic Affairs) after the Modi government came to power in May 2014. These have created a climate conducive for investments in India,” a senior government official told FE.

The roadshows are likely to be held at investor hubs such as Singapore, Hong Kong, Calgary, Houston and New York, among others. Though the exact destinations are yet to be finalised, the petroleum ministry is planning to roll out the mega campaign during April to June. The ministry is preparing presentations to paint an image of the Modi government’s strategy — less government and more governance.

Petroleum minister Dharmendra Pradhan said the policy-reform decisions announced on March 10 would lead to monetisation of natural gas reserves to the tune of $28.35 billion.

The government announced three important changes. First, the marketing and pricing freedom for gas drilled from difficult geologies, including deep-water, ultra-deep and high pressure and high temperature areas. Second, an extension policy for certain categories of blocks that allows for extension of up to 10 years subject to increases in profit share of the government by 10%. Third, an important announcement relating to auction mechanism for allotting exploration blocks — Hydrocarbon Exploration and Licensing Policy (HELP), which would replace New Exploration Licensing Policy (NELP).

Exploration blocks henceforth will be allotted on the basis of a revenue share mechanism rather than the profit share mechanism. Also, there will be an open acreage policy. This means that any qualified company can identify an exploration block at any point in time and can request the government to conduct an auction.

Terming the move to allow market pricing of energy “meaningful progress”, Kotak Institutional Equities, in a March 14 strategy note, said, “We believe economic reforms will be important for the Indian market to sustain, in case global factors were to turn adverse. The government has achieved significant progress in reforms in certain areas.”

“Marketing and pricing freedom is a significant change in the government’s stand,” HSBC said in a March 11 note.

India Ratings & Research, in a March 21 note, said the recent step of a formula-linked ceiling price for deep sea water gas is in continuation with the government’s objective of increasing domestic production in the country, which has fallen to 90 mmscmd (million metric standard cubic metre per day) in FY15 from the highs of 143 mmscmd in FY11.

The government has incentivised deep-sea drilling by way of concessional royalty, with no royalty for the first seven years and thereafter a 5% royalty for deep-water areas and 2% in ultra deep water. India Ratings notes that given the higher costs of production and risks associated with deep-sea drilling, developers found it commercially unviable to extract gas. Nearly 190 billion cubic metre (bcm) or around 35mmscmd gas reserves (15-year production profile) can benefit from the change in the policy.

As a precursor to making them the norm for future bidding and contracts, the government had in September last year introduced the revenue-sharing and uniform licensing models for 69 marginal fields being put under the hammer. The developers of these fields will also benefit from ‘market-determined prices’ sans any government interference. Moreover, the bidders for marginal fields are given the right to sell gas to customers of their choice, unencumbered by the government’s allocation policy.


Do you know What is Receipt Budget, Securities Transaction Tax, Revenue Deficit, Centrally Sponsored Scheme, Non Tax Revenue? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Startup funding being explored for oil, gas sector: Dharmendra Pradhan
2Govt amends Atal Pension Yojana
39.39 crore Jan Dhan accounts seeded with Aadhaar: Jayant Sinha