U- turn on oil blocks: High- level panel for ending revenue sharing contracts
New Delhi, Feb. 17: Two years after the government shifted to revenue sharing contracts for oil and gas block auctions, a high- level panel has suggested reverting to the older system of awarding areas in most basins based on exploration commitment.
The six- member panel, headed by NITI Aayog Vice Chairman Rajiv Kumar, which was formed on the directions of Prime Minister Narendra Modi, in its report submitted on January 29, stated that "unexplored areas in Category II & III basins be bid out exclusively based on exploration work programme".
"No revenue or production sharing other than payment of statutory levies ( including royalty)" should be the criteria, it said. "However, in case of windfall gain defined as revenue of more than $ 2.5 billion in a financial year from the block, then 50 per cent sharing of incremental revenue above $ 2.5 billion."
The BJP- led NDA government had two years back moved from production sharing contracts, where acreage for exploration of
"No revenue or production sharing other than payment of statutory levies ( including royalty)" should be the criteria, report said
However, in case of windfall gain of more than $ 2.5 billion in a fiscal, 50 per cent of incremental revenue should be shared
oil and gas was allocated to firms offering the largest work programmes ( such as carrying out seismic survey and drilling of wells), to revenue sharing contracts, where the firm offering the highest revenue to the government was given the blocks.
Most industry players have been against the new regime.
India has 26 sedimentary basins measuring 3.14 million square kilometres. These are classified into four categories: Category- I basins, where commercial production has been established, like Cambay, Mumbai Offshore, Rajasthan, Krishna- Godavari, Cauvery, Assam Shelf and Assam- Arakan fold belt;
Category- II basins are those with known accumulation of hydrocarbons but no commercial production has been done so far, such as Kutch, Mahanadi- NEC
( North East Coast), Andaman- Nicobar and Kerala- Konkan- Lakshadweep;
The category- III basins have hydrocarbon reserves that are considered geologically prospective, such as in the Himalayan Foreland basin, Ganga basin, Vindhyan basin, Sau- rashtra basin, Kerela- Konkan basin, Bengal basin; and Category- IV are the ones having uncertain potential which may be prospective by analogy with similar basins in the world. These include the Karewa basin, Spiti- Zanskar basin, Satpura– South Rewa – Damodar basin, Chhattisgarh basin, Narmada basin, Deccan Syneclise, Bhima- Kaladgi, Bastar basin, Pranhita Godavari basin and Cuddapah basin.
The committee comprised Cabinet Secretary P K Sinha, Economic Affairs Secretary Subhash Chandra Garg, Oil Secretary M M Kutty, NITI Aayog CEO Amitabh Kant and ONGC Chairman and Managing Director Shashi Shanker.
The operators in Category II & III areas be given more concessions such as full marketing freedom to expedite production, the report said.
"India's import dependence on crude oil and natural gas has been a source of big concern to our government. While we have taken a large number of measures to moderate the increasing demand through the usage of biofuel and alternate technologies, urgent action is needed to increase hydrocarbon production to reduce imports," minister Piyush Goyal had said in his budget speech in the Lok Sabha on February 1.
He had stated that a highlevel inter- ministerial committee has made several specific recommendations, including transforming the system of bidding for exploration, changing from revenue sharing to exploration programme for Category II and III basins.