Government soft launches new hydrocarbon licensing regime

The so-called open acreage policy seeks to have greater industry involvement in the hydrocarbon licensing process


Under the new policy, the government hopes to attract more investments into energy exploration and lower the country’s import dependence. Photo: Bloomberg
Under the new policy, the government hopes to attract more investments into energy exploration and lower the country’s import dependence. Photo: Bloomberg

New Delhi: The government has released the details of 26 unexplored sedimentary basins, which oil and gas companies could access before they seek an exploration and production license in their preferred area.

The data can be accessed from the Directorate General of Hydrocarbons (DGH) at any time and interested entities can place formal bids for the area of their choice from 1 July, a person privy to the development said on condition of anonymity. Once the government receives a bid, it will call for counter-bids from the industry before granting a licence to the winner.

The so-called open acreage policy, which does away with the concept of government offering pre-demarcated blocks to bidders, seeks to have greater industry involvement in the hydrocarbon licensing process.

The idea is to attract more investments into exploration and lower the country’s import dependence at a time when global energy firms are going slow on their capital spending due to weak oil prices. Firms can make bids round the year under this system. The oil ministry is likely to do a formal launch of the data repository before 1 July.

“The National Data Repository is a huge step in offering information about the country’s sedimentary basins, which will enable investors to take informed decision about expressing interest in exploration,” said Debasish Mishra, partner, Deloitte Touche Tohmatsu India Llp. The data repository is a pre-requisite for auction of exploration and production licences under the new hydrocarbon exploration licensing policy (HELP), which replaced the earlier policy under which no auctions were held since 2009, Mishra said.

The open acreage policy and the liberal fiscal terms of pricing and marketing freedom for natural gas under HELP are part of attempts to woo global investors struggling with oil prices below $50 a barrel and geopolitical tensions between the US and countries like the North Korea and Syria that impact oil prices. HELP also allows a contractor to produce both conventional fuels like oil and gas as well as unconventional fuels like shale oil/gas and gas hydrates under the same licence, unlike the earlier policy. HELP was announced in March 2016.

The government has set an aspirational target to cut oil import dependence by 10 percentage points to 67% by 2022 from 2015 levels but consumption of fossil fuels has been increasing despite the rise of clean sources of electricity generation. Net oil imports including crude and finished products surged 7.2% in 2016-17 from a year ago to 184.3 million tonnes, in line with the 7.1% economic growth rate.

The oil ministry has given specific targets to individual upstream firms like Oil and Natural Gas Corp. Ltd and Oil India Ltd to expand their current production and monetize new discoveries.

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