Oil, gas contractors to get rights for other hydrocarbons in their areas

The government is set to announce a new policy on unconventional hydrocarbon resources.

Under this, operators of blocks under the New Exploration Licensing Policy (Nelp) and pre-Nelp rounds will be able to access shale oil, shale gas, coal-bed methane (CBM) and gas hydrates from the same blocks where they are extracting conventional oil and gas.

 The move is likely to benefit not only state-run exploration and production companies Oil and Natural Gas Corporation (ONGC) and Oil India but also private majors Cairn India (now part of Vedanta) and Reliance Industries (RIL).

A new Hydrocarbon Exploration and Licensing Policy (Help) was cleared by the Union Cabinet in March 2016. It allows for a uniform licence to explore and produce all forms of hydrocarbons. According to multiple sources, the government is working on a Cabinet note in this regard.  

“Such a policy will be more beneficial for companies with onshore presence like ONGC, OIL and Vedanta-Cairn, as they are also believed to have strong presence of unconventional resources like CBM and shale in existing blocks. If technology emerges on gas hydrates, it might also benefit offshore players like RIL in the future,” said an expert, on terms of anonymity. 

Under the plan, the government will sign a new contract with a company if it wants to explore the unconventional form of oil and gas in an already allotted area. So, in the same block, while the traditional hydrocarbons will be extracted under the existing production sharing contract model, the unconventional form might be explored under a revenue sharing model.

Experts think the move will open more revenue opportunities for many of the 117 companies that were operating in India after the conclusion of the ninth round of Nelp. At which point, at least 11 public sector undertakings, 58 private and 48 foreign companies marked their presence. Though this country is not known for shale reserves, it is believed to have at least 91.8 trillion cubic ft of CBM reserves. 

The central government has already conducted allotments under the Discovered Small Field Policy (DSF-I) and Open Acreage Licensing Policy (OALP-I). In these, blocks were given under a uniform licensing policy. However, neither attracted foreign players.

The new policy comes when the Union Cabinet relaxed rules for state-owned Coal India to enable extraction of natural gas below coal seams in its blocks, to quickly boost production. Till then, Coal India had to apply to the petroleum ministry for a licence to extract CBM from its coal blocks; it no longer needs such permission.