Government will auction 69 small and marginal oil and gas fields taken away from state-run ONGC and Oil India to private firms on a new revenue sharing model, offering operators full marketing and pricing freedom.
Under the new policy, 69 oil fields which have been held by ONGC and OIL for many years, but have not been exploited, will be opened for competitive bidding. The new policy also allows the operator to explore and produce all forms of hydrocarbons, including oil, gas, shale and coal-bed methane with one license and charge market prices.
“For the first time, a revenue-sharing model is being approved in place of production-sharing contract”, Petroleum Minister Dharmendra Pradhan told reporters after the cabinet meeting.
Cabinet has also approved import of 5,000 tons each of Tur and Urad Dal by MMTC for retail distribution to consumers by September 5.
As an additional change from the existing regime, companies operating these new fields will be able to sell gas to any customer of their choice and not be bound to the government’s allocation policy. These oil fields have not been developed earlier as they were considered as marginal fields, and hence were of lower priority’.
They will probably be bid out on the idea of income share or the share of oil and gas a bidder presents to authorities upfront.
DK Saraf, chairman and managing director, ONGC, said: “The economics for us would be different compared to the nomination regime, so we would consider on a case-by-case whether it works for us or not”. If the company sells at below this price, then the sharing will still have to be done at the market price. “Under the profit-sharing methodology, it became necessary for the government to scrutinize cost details of private participants and this led to many delays and disputes”, a government statement said. The government has not kept a fixed revenue share because it will not protect the Centre’s interest in case of any windfall gain. An oil ministry official clarified the government’s revenue share would be worked out based on whichever of the two prices – the price discovered as a result of the bidding process and the Indian basket price – was higher.
For now, the new model will apply to the 69 small fields to be auctioned within three months.
The government has determined fixed timelines to commence production from these fields – three years for onland, four years for shallow water and six years for deepwater fields. If explorers fail to meet the deadlines, the fields would be taken back.