Oil block licensing: Open acreage replaces NELP as new policy regime

The govt has decided to replace the controversial profit model with a revenue-share model

The government on Wednesday replaced the New Exploration and Licensing Policy with the Open Acreage Licensing (OAL) under the framework of Hydrocarbon Exploration and Licensing Policy (HELP). This replaces the controversial profit model in petroleum with a revenue share model.
 
OAL will allow investors looking for exploring hydrocarbons to select blocks after studying the data available through the national data repository without waiting for a formal bid round from the government.

Investors will have the option to carve out an area of their choice and submit the expression of interest for reconnaissance or petroleum operations contract. DGH will finalise the block and invite bidding biannually. Other companies can submit online and physical bids, following which bids will be evaluated and final contract will be awarded.

Union petroleum minister Dharmendra Pradhan said, "We expect OAL to accelerate exploration activity in the country."

Key Takeaways

Model revenue sharing contract

*Unified licence for all types of hydrocarbons

* Revenue sharing fiscal regime

*Graded royalty rates

*Marketing and pricing freedom

Reconnaissance contract

*For areas with moderate and sparse data

*Contract period two years, extendable by a year

*Contractor can licence data for 12 years

The reconnaissance contract will be for two year extendable by one year as against the petroleum operations contract which will have exploration period of eight to 10 years and contract period of 20 years. For a given area, EOI for petroleum operations contract would be preferred over reconnaissance contract.

Companies can identify stretches through the National Data Repository (NDR) which was unveiled today. In the current round, 2.7 million square kilometres is being offered. 
 
Nine rounds of NELP has attracted $40 billion investment so far. According to Pradhan, the total oil and gas production from NELP, however, is equivalent to just three days of oil consumption.