The Prime Minister Narendra Modi-headed Cabinet Committee on Economic Affairs (CCEA) has announced a clutch of reforms aimed at giving the much-needed impetus to the country’s under-performing upstream hydrocarbon sector. The natural gas output from difficult areas such as high pressure and high temperature, deep and ultra-deep water blocks have been given marketing and pricing freedom subject to a ceiling price. A phenomenal change has been made by replacing the decades-old NELP regime with progressive HELP contracts that offer revenue sharing, open-acreage and uniform licensing to drill both conventional and unconventional hydrocarbons. To top it up, the

explorers would get pricing and marketing freedom. Petroleum minister Dharmendra Pradhan speaks about how the reforms would help attract investments in the oil and gas sector in an interview with Siddhartha P Saikia. Excerpts:

Is the government trying to force Reliance Industries (RIL) to withdraw the arbitration over its KG-D6 assets by making the greater pricing freedom for the gas from unexploited portion of the field contingent on cessation of the arbitration?

The policies are not made keeping in mind any individual or company. We have to proceed in a transparent way and also look into the futuristic aspects (when policies are formulated). It is a well-thought decision.

But RIL cannot get the higher price unless it takes back the arbitration.

We have come up with a formula-driven mechanism. We have recognised two kinds of gas — the existing production and those to be produced from challenging areas. As we have come up with a progressive formula, the questions of disputes (including arbitration) do not arise.

The government is a party to the dispute over the alleged migration of gas from ONGC’s block to adjacent RIL block. How are you going to resolve this issue?

The A P Shah panel will give an expert opinion on the matter and the government will take a final decision. D&M (US-based consultant) has given a technical opinion, which has legal and financial implications. The Shah panel would objectively look at all the relevant aspects and submit an objective report.

The CCEA has given its nod for a new bidding mechanism. Do you think this is the right time for auction, when crude prices have bottomed out?

One needs to understand the theory of sliding down of prices. This (the current crude price) is a new normal. The oil-producing countries have decided to cap and freeze the production. But the reference month is January, which is the peak time for any production cycle. This is post-monsoon peak production. So, is the production decreasing or increasing? It’s actually the new normal and one can’t presume investments in E&P will remain subdued. Nobody can ignore India’s market.

India would start getting additional LNG supplies from 2017. Are there enough demands for gas and what is your strategy to make India a mature gas market?

The world is yet to be a mature gas market. It is a scattered market. India is keen to move towards a gas-based economy. Gradually, we have a plan to put more gas-based energy in the base load area. Fertiliser, transportation and shipping—these are the major areas where there would be substantial gas demand. The government has taken steps for expansion of these sectors.

But the city-gas bidding rounds haven’t attracted investors.

The past experiences of bidding rounds by PNGRB are not very enthusiastic. But PNGRB is an independent and autonomous body. We would be discussing with PNGRB on how a more simplified process can be evolved so that there is more intense competition. The aim is to prepare the ground for players to participate.

Other than the upstream segment, what is on plate for foreign investors here?

In projects like the upcoming petrochemical projects and the Maharashtra mega refinery, foreign investors are welcome to make equity investments.

The government proposes to aggressively expand LPG to BPL households. Are the oil-marketing companies ready for it?

We are analysing how to produce more LPG and estimating how much we have to import. There would be a huge capacity expansion of terminals and new LPG pipelines would be laid and new bottling plants set up. New distributors would be licensed. There would be a process to roll out 10,000 new distributors.

Do you plan to augment strategic crude oil reserves?

We would very soon be filling up the Padur and Mangaluru strategic reserves. Then we would be going for the second phase of the strategic reserves project.