In recent developments, the Government of India has spearheaded the Open Acreage Licensing Policy (OALP) Bid Round-VIII, presenting 10 blocks for the International Competitive Bidding process. This move highlights the progression of policies and practices within the country’s hydrocarbon exploration and production sector.
Understanding the Open Acreage Licensing Policy (OALP)
The Open Acreage Licensing Policy (OALP) is an initiative of the Hydrocarbon Exploration and Licensing Policy (HELP). It was established in June 2017 as a core measure to expedite the exploration and production activities in the energy sector in India. Under OALP, private companies can identify and select specific areas they wish to explore oil and gas resources. They can express interest in any area throughout the year, with these interests compiled three times annually. Following this, the selected areas are put up for auction.
Overview of Hydrocarbon Exploration and Licensing Policy (HELP)
The Hydrocarbon Exploration and Licensing Policy (HELP) replaced the previous New Exploration Licensing Policy (NELP) in March 2016. HELP introduces more accessible regulations, offers tax incentives, grants pricing and marketing autonomy, and forms part of a government initiative to enhance the country’s oil and gas production by up to twice the current output by 2022-23.
Key Functions of HELP
The primary functions of HELP include the implementation of a standardised licensing system that encompasses all hydrocarbons such as oil, gas, and coal bed methane, a shift from the previous model that required separate licenses for different hydrocarbon explorations. HELP also introduces a revenue sharing model where the government gets a portion of the total revenue derived from the sale of oil, gas, etc. It eliminates the need for the government to review and scrutinise the cost details of private players, a requirement under the NELP, which often caused numerous delays and disputes.
The Pricing Approach Under HELP
Under HELP, companies have the flexibility of marketing and pricing. This system replaces the obsolete production-sharing model that often led to losses for the government due to manipulated profits and unnecessary cost inclusions in the investment. The new system under HELP sees a tiered approach where royalty rates decrease from shallow water areas (with lower exploration costs and risks) to deep-water and ultra-deep water areas where costs and risks are significantly higher.
The Perks of Adopting HELP
HELP has several advantages including granting marketing freedom for crude oil and natural gas produced in these blocks. It aligns with the current Government’s policy of “Minimum Government – Maximum Governance”. By eliminating the need for the government to scrutinise cost details of private entities, it fosters an environment conducive for the Ease of Doing Business. Also, it marks a significant shift from government control to support in the upstream E&P operations in India. Through OALP, it removes restrictions on exploration by giving companies both the data and the autonomy to explore areas based on their strategic choices. These advancements undoubtedly position India as a contender in the global energy sector.
Source: PIB
