Issues such as extension of production-sharing contract (PSC), auction of marginal fields, public-private partnership for expanding gas pipeline infrastructure and expansion of overseas firms’ marketing came up for discussion on Thursday as representatives of private energy companies, including Cairn India and BP, met petroleum minister Dharmendra Pradhan, secretary Kapil Dev Tripathi and other top officials.
The interactive session, organised by CII’s committee on hydrocarbons, is being seen as an initiative by the Narendra Modi government to offer a conducive environment for exploration and production of hydrocarbon in the country by including the concerns of the industry while rolling out policy reforms.
As far as PSC is concerned, the explorers want an extension till hydrocarbon flows from the respective assets are dried up. Currently, the norm provides for only five-year extension of the PSC (usually of 20-25 years) for oil fields and 10 years for gas fields. In auction of marginal fields, the industry wants more remunerative pricing regime and tax sops. The investors feel that a PPP model for building and operating pipelines could work only if the government gives support by making available enough anchor load.
The meeting assumes significance at a time when the government wants to attract investment in the oil & gas sector by re-doing the entire process of awarding blocks. The petroleum ministry recently circulated a note to be taken up by the Cabinet Committee on Economic Affairs (CCEA) that proposes three major reforms.
Getting private explorers on board is important, as the petroleum ministry would soon auction 69 small and marginal fields taken away from PSU firms ONGC and Oil India. Auctioning small and marginal fields afresh with attractive incentives is in line with government’s plan to pick low-hanging fruit for increasing the country’s oil and gas output.
The sector is embroiled in issues such as extension of production-sharing contract for Cairn India’s Barmer block.
The government also turned down an application from BP seeking permission to roll out aviation turbine fuel (ATF) retailing.
India’s crude oil production has been stagnant over the past few years. In fact, gas output is falling. This has resulted in increase of imports (see table). Till now, the government has awarded 282 exploration blocks, which include 28 before launch of auctioning of New Exploration Licensing Policy (NELP) and 254 under nine rounds of NELP auction. Under the nine rounds of NELP bidding held so far, the committed exploration investment is about $11.73 billion. Against this, an investment of $12.51 billion has been expended by the contractors for exploration activities, mainly 2D/3D seismic survey and exploratory drilling in the awarded blocks. In addition, about $8.81 billion has been incurred by the contractors for carrying out development activities mainly, drilling and setting of production facilities.
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