Fiscal sops to woo capital, tech to up oil output: Govt
NEW DELHI: The government Wednesday approved financial incentives to attract investments and technology in raising oil and gas production from ageing fields, which will unlock an estimated Rs 50 lakh crore of hydrocarbons in the next 20 years, Oil Minister Dharmendra Pradhan said.
The government will charge half of the Rs 4,500 per tonne cess levied on oil produced from nominated fields of state-owned ONGC and Rajasthan block of private sector Vedanta Ltd through enhanced oil recovery (EOR) and improved oil recovery (IOR) projects.
For gas, a 75 per cent discount in royalty would be given.
“Because of this, new investment and technology will come and Rs 50 lakh crore worth of production will increase in 10 years,” the minister told a news conference here.
Conventional oil and gas fields see output decline and recovery rate drop as they age. To increase recovery rate, EOR and IOR schemes like polymer injection have to be implemented.
“Technological interventions have significant potential in stimulating the recovery of hydrocarbon reserves from the matured/ ageing fields.
“An increase of 5 per cent in the recovery rate of original in-place
volume in oil production is envisaged producing 120 million tonnes of additional oil in next 20 years.
“In case of gas, an increase of 3 per cent recovery rate on original in-place volume is envisaged, leading to the additional production of 52 billion cubic metres of gas in next 20 years,” he said.
The policy, having a sunset clause, will be effective for ten years from the date of its notification. However, the fiscal incentives will be available for 120 months from the date of commencement of production in such projects.
In case of improved recovery projects, the incentives will be available from the date of achievement of the prescribed benchmark.
Defined timelines have been specified to complete the various processes under the policy.
Pradhan said the Union Cabinet approved a policy framework to promote and incentivise enhanced recovery (ER)/ improved recovery (IR)/ unconventional hydrocarbon (UHC) production methods/techniques to enhance recovery factor of existing hydrocarbons reserves for augmenting domestic production of oil and gas.
“We welcome the cabinet’s decision to approve the policy framework on EOR and incentivize companies investing in ER/IR techniques to increase production,” said Sudhir Mathur, CEO, Cairn Oil & Gas, Vedanta Ltd.