The ministry of petroleum and natural gas has set up a six-member expert committee to review the existing production sharing contracts (PSCs) owing to the fall in crude oil prices and the Covid-19 lockdown.
Because of lower oil and gas price environment, there is a need to find ways of attracting investment in exploration and production of oil and gas.
The committee’s scope includes suggesting methodology for increased production and activities and changes required in the existing policies. The panel has members from ONGC, OIl India, directorate general of hydrocarbons (DGH), ministry of petroleum, and former DGH officials, with expertise in the operational aspects of hydrocarbon industry.
“Industry needs relief from cess, royalty, and other incentives. The first decision should come in the form of cess by removing it, because the Hydrocarbon Exploration and Licensing Policy (HELP) has no cess component. The government may not tamper with royalty because it goes to the state. The committee should also consider giving a relief on profit petroleum by offering a moratorium,” said P Elango, managing director, Hindustan Oil Exploration Company.
The Covid-19 pandemic has curtailed activities and downsized the global energy demand, resulting in excess supply and low prices. However, this lower price regime is denting the profits of domestic producers. Based on industry estimates, domestic producers save the country more than Rs 1.7 trillion annually with their production and consequent reduced imports.
“We are happy that the government is looking into enhance the production from domestic sources. We expect some positive recommendations on fiscal front,” said Ashu Sagar, secretary general, the Association of Oil and Gas Operators.
The price of Brent crude was seen at $30.97 a barrel at one point on Sunday. The dip in international prices is positive for India as the country’s import dependency in 2019-20 was around 85 per cent, up from 83.8 per cent in 2018-19. Owing to lower prices, the import bill, too, dropped from $111.9 billion in 2018-19 to around $102 billion in 2019-20. The members of the committee include Yash Malik, advisor to the ministry of petroleum, Sanjay Chawla, ED of ONGC, A R Patel, advisor (finance) of DGH, K S Shaktawat former DGH official, Joydev Lahiri from Oil India, and M B Doja from the geology department of ONGC.
“The problem is it is a PSU-DGH-dominated panel. There is no representation from the private sector, industry bodies, and from top bureaucratic circles. Hence, it has to be seen how fast the suggestions would be converted into decisions,” said an industry source.
Several companies had raised concerns about the pricing of natural gas, too. The natural gas selling price for the period starting from April 1, 2020 came down to $ 2.39 per million British thermal units (mbtu) from $3.23 a unit.