Oil block auction launch after exploration policy revamp: Govt

New Delhi : The government plans to launch the 10th edition of oil and gas block auction after a thorough revamp of existing exploration policy to make it more investor friendly, Oil Minister S Jaipal Reddy said on Sunday.

“We will go for the 10th round quiet early. Before the 10th round, we want to put in place more investor friendly system, both for investment and pricing,” he told reporters at Petrotech 2012 Conference.

Oil block auction launch after exploration policy revamp: Govt

We want to put in place more investor friendly system, both for investment and pricing… we hope the new policy would help avoid or minimise the problems being faced by explorers”  S Jaipal Reddy , Oil Minister

India’s previous nine bid rounds under New Exploration Licensing Policy (NELP) have been lacklustre with global biggies staying away because of issues like tight regulations on pricing as well as delays in getting approvals.

Reddy said a committee headed by Prime Minister’s Economic Advisory Council Chairman C Rangarajan is expected to submit recommendations on revamp of the exploration policy as well as the terms of contracts signed by companies to explore and produce oil and gas.

It may suggest “alternate models” in next few weeks, which would then be taken to the Cabinet for approval, he said. Once Cabinet clears the changes, the 10th round of NELP would be launched.

“Our endeavour is to initiate the 10th round in current calendar year,” he said.

Exploration firms have raised concerns about lack of pricing and marketing freedom as well as fiscal stability. The government not just controls fixation of natural gas price but also nominates buyers and quantities to be sold to them.

The Rangarajan Committee has also been asked to suggest “structure and elements of the guidelines for determining the basis or formula for the price of domestically produced gas, and for monitoring actual price fixation”.

Reddy said he hoped the new policy would help “avoid or minimise” the problems being faced by explorers.

Current Production Sharing Contracts (PSCs), signed under the NELP of 1999, provide for explorers to first recover all of their capital and operating expenditure from oil and gas revenues before sharing profits with the government as per a specific formula.

The model has come in for criticism from the CAG as it provides incentive to explorers to delay government’s maximum profit take.

The panel may suggest moving to a production-linked payment regime where explorers may be asked to bid for a percentage of output they would share with the government. The firm offering the maximum, would win a block or area.

“If PSC is to be improved or replaced, the Union Cabinet has to clear it,” Reddy said.

The government has so far awarded 254 blocks for exploration in 9 rounds of NELP. Last last round, NELP-IX was offered in 2010.                            –PTI

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