Seeking to increase exploration and production, India’s Union Cabinet has approved a new round of changes in oil and gas licensing and regulation.
“Considering stagnant/declining domestic production of oil and gas, rise in import dependence, and decline in investment in E&P activities, the need to bring further policy reforms was felt,” said a statement by the Ministry of Petroleum and Natural Gas.
The government in 2016 changed terms of participation to revenue-sharing, introduced open-acreage licensing, and offered a uniform license allowing development of all forms of hydrocarbon (OGJ Online, Mar. 10, 2016).
Under the new changes, bidding for licenses in basins with no current production will be based strictly on work programs with no sharing of revenue or production with the government. Operators still will pay royalties and statutory levies.
For unallocated or unexplored areas in producing basins, bidding will be based on revenue-sharing, but work programs will receive greater weight than before. A ceiling on biddable revenue shares will prevent unviable bids. Exploration periods have been shortened, and fiscal incentives will encourage early production. License holders will be able to sell oil and gas through competitive bidding.
The new changes also grant marketing and pricing freedom to operators with gas discoveries for which field development plans have not been approved. They include fiscal incentives “on additional gas production from domestic fields over and above normal production.”
For “nomination fields” held under rights granted before license bidding began, state-owned Oil & Natural Gas Corp. and Oil India Ltd. will be required to prepare “enhanced production profile[s].” They’ll be able to form partnerships with private companies for production-enhancement projects.
And the government will adopt unspecified measures “for promoting ease of doing business,” including a new “coordination mechanism” and acceleration of approvals by the Directorate General of Hydrocarbons.