Govt To Revise Oil Production Contract Norms

The ministry for petroleum and natural gas has decided to change its policy on the award of production contracts for discovered oil and gas fields to the private sector.

The new policy, which is being framed keeping in mind criticism of the existing policy, will be placed before the new government for approval. The ministry has also decided to put on hold the signing of contracts for awards that have already been made to private parties.

Official sources said in view of the vocal, though often misinformed, criticism of the existing policy, the signing of the production sharing contracts for these discovered oil and gas fields would be undertaken only if the new government approves of these awards.

 

The sources said that though the ministry felt that there was nothing wrong with the existing policy, it has been forced to abandon it in view of highly critical views expressed against it both inside and outside Parliament.

The policy has been given such a bad name, it is prudent to hang it now, said an official on condition of anonymity. The official was of the view that the new policy would not have many new additions to it. He was confident that only cosmetic changes would be made to give the policy a new look.

So far as the ministry is concerned, it is sure that the policy is quite sound. We have defended it both in courts and before the comptroller and auditor general (CAG). However, the public perception of the policy is totally different, he said.

The Union cabinet has already given its go-ahead for the signing of production-sharing contracts for 26 exploration blocks and 12 discovered oilfields.

Though the government had finalised the award of these exploration blocks and discovered oil fields to joint ventures in October 1996, not much headway has been made in the signing of production sharing contracts.

The matter was referred to the group of ministers comprising the deputy chairman of the Planning Commission, petroleum and finance ministers, in October 1997. The group of ministers gave its go-ahead to the petroleum ministry to finalise and sign contracts for the 26 exploration blocks for which awards had already been made.

It was also decided to recommend to the cabinet, approval for the award of Ratna and R series of medium-sized discovered oil fields and 11 small fields to private consortia along with suitable compensation to the Oil and Natural Gas Corporation (ONGC) for costs incurred in the past. This compensation was to be borne out of the governments share of profit oil or through the administered price mechanism till such time as the APM exists.

ONGC had made it clear to the group of ministers that joint ventures were welcome as they may yield higher returns. However, at the same time, ONGC had sought that it be compensated for past exploration and development costs.