The Indian Government, led by the Prime Minister, has announced a significant overhaul in the exploration and licensing sector for oil and gas. The objective is to stimulate investment, promote the exploration of untapped areas, and liberalize the policy of operating basins. Given the pressing need for energy security and reducing import dependence, this national-level policy reform has been long overdue.
Four Primary Areas of Emphasis
The reforms primarily focus on four areas: increasing exploration activities in uncharted territories, enabling freedom in marketing and pricing, enhancing production profile, and promoting ease of doing business.
Incentives such as fiscal concessions and shorter exploration periods will be provided to encourage exploration activities in unexplored areas. As part of the reforms, contractors can bid on undiscovered basins without sharing revenue or production with the government. They are only subject to pay royalties or levies.
To further enhance gas production, the policy offers freedom in marketing and pricing for new gas discoveries yet to have their Field Development Plan (FDP) approved. Moreover, fiscal incentives are set for additional gas production from domestic fields beyond the standard production.
Enhanced Production and Ease of Doing Business
Big players in the public sector, like Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL), will prepare an enhanced production profile for their existing fields. For production enhancement, bringing new technology, and capital, No Objection Certificates (NOCs) will be allowed to induct private sector partners.
Furthermore, the policy aims to foster ease of doing business by setting up coordination mechanisms and simplifying approval processes. Alternate dispute resolution mechanisms will also be established to handle any arising disagreements or conflicts.
Background of the Policy Framework
This policy reform was necessitated due to the declining domestic production of oil and gas, increasing dependence on imports, and reduction in investment in E&P activities. The government had provided pricing freedom for all fields between 2016 and 2019, except those given to state-owned ONGC and OIL. However, restrictions on marketing kept the prices artificially low, inhibiting competition.
Benefits of the Policy Reform
The reform is expected to fuel the development of support services, generate employment opportunities, facilitate the transfer of advanced technology, and save foreign exchange spent on imports. It aligns with India’s goal of becoming self-reliant as outlined in the Atmanibhar Bharat initiative and helps to transition India into a gas-based economy.
About Petroleum and Natural Gas in India
In India, petroleum has been found mostly in sedimentary rocks from the tertiary period. It serves as a crucial energy source for internal combustion engines used in automobiles, railways, and aircraft. Additionally, by-products of petroleum have extensive applications in various industries like fertilizers, synthetic rubber and fibers, medicines, and cosmetics.
Major oil-producing areas in India include Digboi, Naharkatiya, and Moran in Assam; Ankleshwar, Kalol, Mehsana, Navagam, Kosamba, and Lunej in Gujarat; and Mumbai High in Maharashtra. As for natural gas, it has been discovered in several regions such as Jaisalmer, Krishna Godavari delta, and Tripura.
About ONGC
The Oil and Natural Gas Corporation (ONGC) is a leading public sector undertaking of the Government of India. Established in 1995 under the Ministry of Petroleum and Natural Gas, it is India’s biggest crude oil and natural gas company and contributes around 70% to Indian domestic production.
With these newly approved policy measures, India hopes to boost its oil and gas sector, paving the way for increased domestic production, lowered import reliance, and overall energy security.
Last Modified: February 9, 2024