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Tuesday, 7 June 2016

India launches road show for small oil, gas fields’ auction

Petroleum Minister Dharmendra Pradhan on Monday launched the first road show for the Discovered Small Fields Bid Round auctions in 2016, saying the auctions under the new Hydrocarbon Exploration and Licensing Policy (HELP) would usher a more transparent regime of resource allocations and greater ease of doing business. “The spirit behind the journey from NELP (New Exploration Licensing Policy) to HELP is to
create administrative and fiscal systems which are a lot simpler and transparent,” said Dharmendra Pradhan, launching the auction of small fields across 9 sedimentary basins in India. “Given India’s nearly 78 per cent dependence on energy imports, all quantities of hydrocarbon …big or small… are crucial for the country. And therefore, we feel that this new bid round is a timely step in the right direction,” he added. In March, the government approved a new oil and gas exploration policy based on a revenue-sharing model, as opposed to cost-and-output-based norms earlier. The new model will replace the controversial production sharing contracts (PSCs) – by which oil and gas blocks are awarded to those firms which show they will do maximum work on a block – that has governed the bidding under the earlier nine NELP rounds.
Under the Discovered Small Field Policy, the government is offering for bidding 67 discovered small fields in 46 contract areas spread over nine sedimentary basins on land and in shallow and deep water areas. The fields offered hold 625 million barrels of in-place of oil and gas reserves. Bidding will open on July 15 and the last date is October 31. The previous exploration licensing round ended in March 2012. Of the 46 small fields, 26 are on land, 18 offshore in shallow water and two in deep water. While 28 discoveries are in the Mumbai offshore, another 14 are in the east coast’s Krishna Godavari basin. A ministry source said operators will be issued a single licence for exploration of conventional and non-conventional hydrocarbons and will have the freedom to sell oil and gas at “arms length” market prices, adding there would be no cess on crude oil. The PSC regime, which allows operators to recover all investments made from sale of oil and gas before profits are shared with the government, was criticised by India’s official auditor, who said it encouraged companies to keep inflating costs – “gold plating” – so as to postpone giving higher share of profits. The change in model is designed to help keep the government share in cases of windfall from both steep rise in prices as well as quantum jump in production. The small fields up for auction have been surrendered by state-run explorers ONGC and Oil India, as they found it uneconomical to develop them in view of small reserve size and high economic cost.

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