Green signals for auction of 69 oil and gas fields

GN Bureau | September 2, 2015




The government has decided to simplify oil and gas exploration rules and also offering to auction 69 small and marginal oil and gas fields that will come with full marketing and pricing freedom.

The fields hold 89 million tonne of oil and gas resources which are worth Rs 70,000 crore at current prices.  The cabinet meeting chaired by prime minister Narendra Modi approved auctioning of the fields that state-owned firms Oil and Natural Gas Corp (ONGC) and Oil India Ltd have surrendered because they were uneconomical due to size, geography and state-set low sale prices.

The 69 fields will be clubbed into clusters and offered for bidding within 3 months, said petroleum minister Dharmendra Pradhan.

Besides offering minimal interference in operations of the field, the government will allow companies to sell oil as well as natural gas produced from these fields at market price and with no restriction on who they sell the produce to, he said.

Meanwhile, seeking to revive interest in oil and gas exploration by simplifying rules, the government will replace the controversial production sharing contract (PSC) with simpler revenue-sharing regime.

The new model will replace the current practice of companies getting blocks by bidding maximum work programme and then recovering all of their investment before sharing profits with the government.

The PSC model was criticised by CAG which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government. In the new regime, the companies will have to indicate the revenue they will share with the government at different stages of production as well as at different rates.

"This auction will also usher in a unified licensing regime which will give operators right to produce both conventional oil and gas as well as unconventional resources like shale oil and gas and coal-bed methane (CBM)," Pradhan said.

Pradhan said a bid document will be brought out in three months after which the auction process will begin. In all Oil and Natural Gas Corp (ONGC) has 110 small and marginal oil and gas discoveries in the blocks or areas it got from government on nomination basis.

Of these, the company has been allowed to retain 47 where some work has been done and rest have to be surrendered. Oil India Ltd has surrendered all of its 6 small and marginal discoveries. Of the 69 fields to be auctioned, 36 are offshore and 33 onshore.

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