Govt proposes revenue-sharing model for future gas auctions

It has also provided pricing and marketing freedom for the natural gas

With current rates considered too low to support exploration and production cost, the government today proposed to free natural gas pricing as well as replace the controversial Production Sharing Contract (PSC) with simpler revenue-sharing regime for all future field auctions.

In September, the government had allowed pricing freedom for the gas produced from 69 small and marginal fields it plans to auction shortly.

"In the recently announced marginal field policy, the government has provided pricing and marketing freedom for the natural gas. On similar lines, it is proposed to provide pricing and marketing freedom for the natural gas to be produced from the areas to be awarded under the new contractual and fiscal regime in order to incentivise production from these areas," the Oil Ministry said today.

Seeking to revive interest in oil and gas exploration by simplifying rules, the ministry today invited comments from stakeholders on a consultation paper on new fiscal and contractual regime for award of hydrocarbon acreages.

International players like BP and private operators including Reliance Industries as well as state-owned Oil and Natural Gas Corp (ONGC) have been seeking pricing freedom as the current rates make new investments unviable.

The BJP-led government had in October last year approved a new pricing formula for all domestically produced natural gas. As a result, rates rose by about 33% to $5.61 per million British thermal unit for a period up to March 31 from the long-standing price of $4.2. The rates, on net calorific value (NCV) basis, dropped to $5.05 per mmBtu for six month period beginning April 1, 2015. From October 1 rates fell to $4.24.

"Government of India has been reviewing policies from time to time for exploration activity and investment there in. Over the years, there has been a shift in the E&P policy, from nomination acreage to competitive bidding... Recently government has approved policy for auctioning of 69 marginal fields of ONGC/OIL. Government has attempted many reforms in the E&P management through this policy in tune with government's goal of 'ease of doing business'," the notice said.

The ministry proposed a Uniform Licensing Policy that will allow exploitation of all forms of hydrocarbons - conventional oil and gas as well as unconventional shale oil and gas and coal-bed methane (CBM) under one permit.

At present, conventional oil and gas exploration is covered by the New Exploration Licensing Policy (NELP) while CBM exploration and production is governed by a separate regime. There is no licensing regime for shale oil and gas.

It also proposed Open Acreage Licensing Policy (OALP) allowing companies to choose the area for exploration rather than government identifying blocks and offering them in bid rounds.