Deadline for comments on oil, gas revenue-sharing contracts extended

The Petroleum Ministry has extended the deadline until Sep 20 for stakeholders' comments on a simpler revenue sharing contract, which proposes to replace the present Production Sharing Contracts (PSC).

"Timeline for receiving comments on the draft Model Revenue Sharing Contract (MRSC) has been extended up to Sep 20, 2014," an order by the ministry said.

The ministry Aug 21 uploaded a model revenue-sharing contract for exploration and production of oil and gas and sought comments from stakeholders by Sep 10.

The MRSC follows the recommendations of the committee headed by C. Rangarajan suggesting the government shift to a revenue sharing regime where companies bid upfront the quantity of oil and gas they will share with the government for winning an exploration acreage.

A production-linked contract is considered more transparent than the existing PSCs, where the contractor first recovers his expenditure before sharing profit with the government.

India's official auditor had earlier criticised PSCs saying these encouraged companies to raise cost so as to postpone a higher share of profits to the government.

Under the MRSC regime, companies would have to indicate the quantity of oil and gas they would share with the government at different stages of production as well as at different rates.

"The government's revenue share of crude oil and/or natural gas shall be determined based on a two dimensional production-price matrix, where Government's revenue share with the contractor(s) shall be linked to the average daily production in a month and average oil and gas prices in a month," the draft MRSC said.

The government's revenue share shall be determined separately for crude oil and natural gas in accordance with the production - price matrix by reference to the applicable price band and production tranche.

The contractor's share of revenue from petroleum produced and saved, shall be the amount of revenue for the relevant month remaining after deducting the government's revenue share ("contractor's revenue share"), the contract said.