Odisha News Insight

India unveils new licensing, pricing norms for difficult gas discoveries

Photo Dharmendra PradhanNew Delhi, March 10: Hydrocarbons discovered and produced from difficult areas will now get a new pricing norm to encourage production and unlock Rs.180,000 crore worth of reserves that are stuck due to want of incentives, Petroleum Minister Dharmendra Pradhan said on Thursday.

Briefing reporters on the decisions taken at a meeting of the cabinet, presided over by Prime Minister Narendra Modi, the oil minister said also approved on Thursday was a new oil and gas exploration policy with a revenue-sharing model, as opposed to cost-and-output-based norm.

The difficult areas are defined as those from deep-water, ultra deep-water and high pressure-high temperature areas. Such areas were not considered when prices were fixed for normal gas discoveries in 2014. The bulk of such fields are with Reliance Industries and state-run Oil and Natural Gas Corp.

The oil minister said production sharing contracts on some of the discovered fields could not be signed during last two decades due to a number of reasons, including arbitration proceedings, court cases, observations by the official auditor on “gold plating” of costs and alleged scandals.

“Resources worth more than Rs.261,000 crore will be brought into production as the result of today’s cabinet decisions,” Pradhan said. “The decisions will also go a long way in generating employment, enhance transparency and reduce administrative discretion.”

He said the new exploration licensing policy will allow production of both conventional and unconventional hydrocarbons, including shale gas, under a single license. “It also provides for marketing freedom for crude oil and natural gas produced from the blocks.”

Among the other decisions of the cabinet pertaining to the oil and gas sector, a Rs.8,000-crore outlay was provided to extend subsidised cooking gas to 50 million poor families in the name of the woman member, and the extension of contracts for 28 older hydrocarbon blocks.

This apart, the cabinet cancelled the award of the Ratna and R-Series field in 1996 to a consortium of Essar Oil and Oil Pacific UK. In his budget speech last month, Finance Minister Arun Jaitley had said the government will extend incentives for the discovery and exploration of gas by providing companies the freedom to market the output.

“India is blessed with rich natural resources including oil and gas. However, their discovery and exploitation has been below our potential. Imports of hydrocarbons occupy a large share of India’s total imports,” Jaitley said.

“As part of our drive towards self-sufficiency, the government is considering to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas, which are presently not exploited on account of higher cost and higher risks,” he said.

He said companies will be provided calibrated marketing freedom, and also a pre-determined ceiling price discovered from global benchmarks.(IANS)

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