The petroleum ministry is working towards putting in place a hassle-free framework for extension of production sharing contracts (PSCs) with small and medium-sized oil and gas fields. The new policy would help nearly 28 fields held by both government explorers like ONGC and private firms like Reliance Industries (RIL) and BG India.
The move is aimed at helping explorers plan their investments in these producing assets.
“A note on policy framework for granting extension to small and medium-sized discovered fields is at the stage of inter-ministerial consultation.
This policy will bring out transparent guidelines for granting extension,” two senior officials at the petroleum ministry told FE.
The proposal would be put up before PM Narendra Modi-led Cabinet Committee on Economic Affairs for its implementation.
These small and medium-sized fields were alloted to explorers for a certain period prior to the launch of auctioning of oil and gas blocks under the New Exploration and Licensing Policy (NELP) regime. Once the lease gets over, the explorers apply to the Directorate General of Hydrocarbons (DGH) and the petroleum ministry for extension till assets continue to produce hydrocarbon. In absence of a proper policy for such cases, firms currently face difficulty in getting the contract extended.
The new policy being worked out by the government may offer extension of contract till ‘economic life’ of the assets exists. However, there are riders — for example, explorers would have to share a higher percentage of profit petroleum than they currently do. That’s because the government believes that the cost incurred in finding and extracting hydrocarbon has already been recovered by the companies.
Laying out a investment-friendly regime for oil and gas companies is one of the prime focus of petroleum minister Dharmendra Pradhan. Increasing domestic production of hydrocarbon is the need of the hour — India’s crude import bill has sky rocketed from $112.1 billion in FY11 to $ 155.7 billion in FY14. On the other hand, production of oil and gas from domestic fields is rather stagnant.
However, this policy may not cover Cairn India’s plea to extend the contract term for the prolific Barmer block, in Rajasthan. The production-sharing contract for the block RJ-ON-90/2 expires in 2020 and the Vedanta Group company has applied for another 10-year extension.
In October, the Modi-led CCEA decided to roll out a policy framework for relaxations, extensions and clarifications at the development and production stage under the PSC regime for early monetisation of hydrocarbon discoveries. The initiative was targeted at helping monetisation of some pending discoveries, leading to resolution of various operational issues that are hampering exploration and production operations.
India has total reserves (proved and indicated) of 760 million metric tonne of crude oil and 1,330 billion cubic metre of natural gas, shows latest data available with government.
Lubricating machinery
* The policy, which will cover small and medium-sized fields like Panna-Mukta, will mean immediate clarity for 28 fields as a result of which companies can plan investments better
* Extension of the production sharing contract is likely to be offered till economic life of the asset
* The rider is, the operator may have to share a bigger share of profit with the government
* The proposal will be put up before PM Modi-led Cabinet Committee on Economic Affairs for implementation