India’s Union Cabinet has approved a multifaceted Hydrocarbon Exploration & Licensing Policy (HELP) to spur investment and enhance production, according to the government’s Press Information Bureau (PIB).
A “uniform license” will allow exploration and production companies to explore for and produce “all forms of hydrocarbons” including coalbed methane, shale gas and oil, tight gas, and gas hydrates under a single license.
An “open acreage policy” will enable companies to choose blocks from designated areas (OGJ Online, Aug. 28, 2012).
A “revenue sharing model” will replace a system based on profit sharing after cost recovery. The government “will not be concerned with the cost incurred” and will receive a share of gross revenue from the sale of oil and gas. PIB said the profit-sharing methodology “led to many delays and disputes.” (OGJ Online, Sept. 2, 2015)
The government has also introduced a graded system of royalty rates for offshore areas, with rates decreasing from shallow-water to deepwater and ultradeepwater. PIB said the rates are lower than royalty rates under India’s NELP, or New Exploration Licensing Policy, that had its first bid round in 1999 (OGJ Online, Aug. 17, 2012). Royalty rates for onshore areas “have been kept intact so that revenues to the state governments are not affected.”
PIB also said India’s Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has approved a policy to extend production-sharing contracts for 28 small and medium-sized fields. All but one were awarded in two bidding rounds during 1991-93. “For many of these fields, the recoverable reserves are not likely to be produced” within the remaining duration of the contract periods, he said.
During the extended periods, the government share will be 10% higher than with normal PSC provisions. Monetization of the reserves during extended periods is estimated to be valued at $8.25 billion and will require additional investment of as much as $4 billion.
The economic affairs committee also approved “pricing freedom” for natural gas produced from areas involving high pressures, high temperatures, deepwater, and ultradeepwater. Prices will have a ceiling based on the “landed price” of alternative fuels. The policy guidelines are for future discoveries and existing discoveries that didn’t start commercial production by Jan. 1.