Last couple of years has seen implementation of major policy reforms in upstream hydrocarbon segment in India and many others are under consideration. All such policies/guidelines being considered or implemented by the Government in the interest of the upstream Oil and Gas sector are listed below:
1. Discovered Small Field (Marginal) Field Policy: To reduce the import dependency of hydrocarbons, it is pertinent to effectively exploit the established reserves and increase the indigenous production. It was observed that many discoveries made in Nomination blocks are not monetized and are categorized as Marginal fields. Government of India in October 2015 announced Marginal Field Policy which was later rechristened to Discovered Small Field Policy. This policy will help to monetized more than 85 MMT (O+OEG) reserves. It will boost production and provide increased revenue to both government and contractor. Highlights of this policy are as follows:
- Revenue Sharing contract : A simple and easy to administer contractual model in line with Government’s effort to promote ‘Ease of doing business’ requiring minimum regulatory burden for field monetisation.
- Single licence for Conventional & Non-conventional hydrocarbon : Single licence for explore and extract all hydrocarbon resources, including CBM, Shale gas/oil, tight gas, gas hydrates and other resources to identified in future.
- No restriction on exploration activity during contract period : Contractor will be allowed to carry out exploration during entire contract duration .
- Eligibility for Bidding : Up to 100% participation by foreign companies, Joint ventures will be allowed. No mandatory state participation and no carried interest by ONGC and OIL are envisaged.
- Crude Oil & Gas Pricing and Sale : Contractor will be free to sell the crude oil and Natural Gas exclusively in doemstic market through a transparent bidding process at arm’s length.
- Oil Cess & Royalty : No Oil Cess will be applicable on crude oil production however, Royalty rates will be as under NELP regime.
- Custom duty : Customs duty exemptions for specified goods and services will be available for contract areas.
2. New domestic Natural Gas Pricing Guidelines: In order to strengthen the developing Gas market in the country, Government of India started pricing reforms for the natural gas sector by approving new gas pricing scheme in October 2014. This policy is based on the prevailing hub prices of United States, Mexico, Canada, Europen Union and Russia. The price has revision cycle of six months and will be applicable to all sectors uniformly. Continuing the further reforms in pricing on 21.03.2016 government approved marketing and pricing freedom for Gas discoveries in Deepwater and Ultra Deepwater areas which are yet to commence commerical production as on 01.01.2016 and all such future discoveries. This shall incentivize exploration and production in Deep/Ultra deep/High Pressure High Temperature (HPHT) areas and will unlock huge hydrocarbon potential. Further with a view to protect the interests of the consuming sector as well as paying heed to the requests from producing sector, a ceiling based on the landed cost of the alternate fuel has been imposed. The ceiling price in US $ per mmbtu (GCV) shall be calculated as lowest of the (i) Landed price of imported fuel oil (ii) Wighted average import landed price of substitue fuels and (iii) Landed price of imported LNG. The landed price-based ceiling wil be calculated once in six months and applied prospectively for the next six months.
3. Hydrocarbon Exploration Licensing Policy (HELP) – On 10th March 2016, Government approved Hydrocarbon Exploration Licensing Policy (HELP) which is based on new contractual model i.e. Revenue Sharing. As the model is centered around a matrix of biddable revenue share vis-a vis level of production by the Contractor itself, it is expected to eliminate the areas of disputes related to cost recovery, Investment multiple calculation, cost of unfinished work program, rigidities of timelines, delays in implementation of FDP etc. The implementation of RSC model is envisaged to minimize regulatory burden for the sake of ease of doing business, and increase the ease of business in India for both National and International contractors. Major highlights of HELP is as follows:
- Open Acreage Policy-option to select the exploration blocks without waiting for formal bid round.
- Revenue Sharing Model-simple, easy to administer- no cost recovery – no micro-management by the Government – operational freedom to the operator
- Pricing and Marketing Freedom- a major incentive for investment
- Single License for exploration and production of conventional as well as non-conventional hydrocarbon resources
- Exploration allowed through-out the contract period .
- Increase in exploration phase- Exploration Phase for onshore areas have been increased from 7 years to 8 years and for offshore increased from 8 years to 10 years.
- Reduced Royalty rates for offshore blocks .
4. Policy for extension of Production Sharing Contracts (PSC): To enable Oil and Gas companies recover the balance reserves from fields after expiry of PSC, Government of India on 10th March 2016 approved policy for the grant of extension to the Production Sharing Contracts for small and medium size fields. This policy provides for a uniform, non-discretionary framework for extension of contract in respect of 28 Pre-NELP discovered fields. The extension has been granted for a period of 10 years both for Oil and Gas. During the extension period, it is proposed to increase the Government take by way of charging normal royalty and cess in place of concessional royalty and cess charged during the original contract period. The profit petroleum during extension period will also be 10 percent higher than the normal percentage.
5. Policy for testing requirement: To resolve the dispute related to testing requirements and to monetize the stuck up discoveries, Government in Cabinet Committee on Economic Affairs (CCEA) meeting held n 29.04.2015 approved the policy on Testing Requirement for discoveries in NELP blocks. This decision of was implemented on 13.05.2015. The contractors are now allowed to carry out the pending drill stem test on the discoveries and submit the results in a specified time line. Testing is being carried out on all concerning/applicable discoveries which were stuck up earlier.
6. National Data Repository (NDR): To consolidate and store all the Geo- scientific data available in the country and to create a base for Open Acreage Licensing Policy, GoI has taken initiative to build National Data Repository (NDR) for Oil and Gas Industry in India. Site preparation work for NDR project at 5th and 6th floor of DGH office, Noida and Commissioning of Hardware and integration of Software at the site has been completed. Initial population of data is in progress and the priority data pertaining to reassessment of 26 sedimentary basins is being loaded. As on 31.03.2016, total 169144.77 LKM 2D Seismic data, 15716.28 SKM 3D Seismic data, 237 well and log data and 618 well reports is loaded in NDR.
7. Site Restoration Guidelines on petroleum operations: Government of India has constituted a committee for formulation of Site Restoration guidelines for petroleum operations. An internationally reputed consultant was hired. The consultant had submitted draft report, which was reviewed by the committee members. Recommendation of committee members is finalized, adopted and submitted to Ministry for notification.
8. Standing Committee on Petroleum Industry Practices: Government of India has constituted Standing Committee on Petroleum Industry Practices, to identify the areas requiring codification of “Good International Petroleum Industry Practices (GIPIP)” and to prepare national codes for petroleum operations. An internationally reputed consultant has been hired. The consultant had submitted the report in 2015. Subsequently to several deliberations with all stakeholders, the report was suitably modified and standing Committee has approved, adopted the report and submitted to Ministry for notification.
9. Encouraging E&P activities in North East India: To encourage hydrocarbon exploration and production activities in the North East (NE) Region of India, Government of India carried out special study with consultant for framing Hydrocarbon Vision Document 2030 for NE India. The vision document was released at Guwahati on 09.02.2016. This vision document aims to prepare a roadmap for the next 15 years to increase the production of oil and gas in northeast India and outline the necessary investment in the hydrocarbon sector to increase exploration activities, expand the piped natural gas (PNG) network and ensure availability of petroleum products, including LPG, in the remotest corners of the region. The vision rests on the following five pillars viz.
People, Policy, Partnerships, Projects and Production. For implementation of the action plans emerged from this vision ocuments, an Executive Council is formed consisting of government officials and industry stakeholders.
10. Policy Framework for Relaxations, Extensions and clarifications at the Development and Production stage under PSC regime for early Monetization of hydrocarbon discoveries: To address various issues and concerns regarding PSCs, the policy framework for relaxation, extensions and clarifications at the development and Production Stage under the PSC Regime was notified in November 2014. As a result of implementation of these guidelines, more than 40 long pending PSC related issues have been resolved.
11. Exploration in Mining lease areas: Government of India has formulated a policy to allow exploration in Mining Lease Area with cost recovery subject to establishment of commerciality. Till 31.03.2016, 15 hydrocarbon discoveries (14 Oil & 1 Gas) have been notified in the Mining Lease (ML) areas after announcement of above policy. Document of Commerciality (DoC) for one discovery D-55, from the Block KG-DWN-98/3 is submitted.
12. Multi client Geo-scientific surveys: Seven proposals have been received for generation of approx 107386 LKM 2D Seismic data, under the policy for Geo-scientific data generation for hydrocarbons in Indian sedimentary Basins, through Non-exclusive Multi-Client Geo-scientific surveys/ Activities. All the seven proposals have received clearances from Ministry of Defence (MOD) and Ministry of Home Affairs (MOHA). M/s Electromagnetic Geoservices ASA, Norway, started data acquisition in West Coast of India.
13. Re-assessment of prognosticated hydrocarbon resources of India: A Multi Organization Team (MOT) has been constituted to carry out re-assessment of hydrocarbon resources of India in all its 26 sedimentary basins. The project to be carried out by ONGC in association with OIL and DGH. Work has been initiated at seven work centers of ONGC for eight priority basins. Entire work for all 26 sedimentary basins is expected to be completed by November, 2017.
14. Appraisal of Un-appraised Sedimentary areas: Out of total sedimentary area of 3.142 Million Sq. Km, an area of 1.502 Million Sq. Km is yet to be appraised. Appraisal of sedimentary basin has been defined as the status of knowledge building efforts for evaluating hydrocarbon prospectivity of the basin though Geological studies, Geophysical surveys and exploratory drilling. To appraise un-appraised areas, MoP&NG has formulated a plan to conduct 2D seismic surveys in all sedimentary basins of India where no/scanty data is available. ONGC and OIL have been entrusted with the task of surveying these areas. OIL has been assigned to carry out 2D seismic API of 7408 LKM falling in North eastern part of India and ONGC has been assigned to carry out 2D seismic API of approx. 40835 LKM seismic data in onland part of 22 sedimentary basins of India. Currently the tendering work for carrying out seismic surveys is under progress.
15. Policy Guidelines of Exploration and Exploitation of Shale Gas and Oil: Shale Gas and Oil Policy was announced on 14th Oct 2013 and under this Policy the right to exploration and exploitation of Shale Gas & Oil has been granted to the National Oil Companies (NOCs) holding Petroleum Exploration License (PEL)/Petroleum Mining Lease (PML) granted under the nomination regime. NOCs has identified 55 blocks for Assessment Studies during the Phase-I of three years. Currently 18 wells have been drilled by ONGC and results are encouraging. Further NOCs will identify 80 blocks under Phase-II of three years and 55 blocks in Phase-III. Each Phase will culminate in a development and production phase depending on the results of the Assessment Phase.