India reviewing production sharing contracts

The Indian government has formed a committee to review the country’s production sharing contract (PSC) structure, especially the profit-sharing mechanism.

According to the Ministry of Petroleum & Natural Gas, the five-member group is to submit recommendations by Aug. 31 after reviewing existing PSCs and exploring “various contract models with a view to minimize monitoring of expenditure of the contractor without compromising, firstly, on the hydrocarbons output across time and, secondly, on the government’s take.”

The committee also is to review auditing mechanisms and price formulas as well as “any other issues relating to PSCs.”

In mid-May, Minister of State for Petroleum and Natural Gas Shri R.P.N. Singh told the upper house of the Indian parliament the government had appointed Boston Consulting Group (India) Pvt. Ltd. to study PSCs.

In that report, Singh also said the Comptroller and Auditor General (CAG) had conducted a special audit of four blocks and recommended that future PSCs omit linkage of an investment multiple with the profit-sharing formula and instead use a single biddable profit-sharing percentage.

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