India’s Oil and Gas Exploration Policies

India’s oil and gas sector has undergone changes in its exploration policies over the past two decades. The New Exploration Licensing Policy (NELP) introduced in 1999 marked a very important shift towards attracting private and foreign investments. This policy was designed to enhance exploration activities in India’s upstream sector, leading to numerous discoveries. However, challenges emerged, prompting the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP) in 2016. This new framework aimed to create a more investor-friendly environment.

New Exploration Licensing Policy (NELP)

NELP was launched to boost oil and gas exploration. It allowed companies to recover investments before sharing profits with the government. Between 1999 and 2010, NELP attracted over USD 17.6 billion in investments, leading to 67 oil and 110 gas discoveries. However, delays in clearances and disputes over cost recovery hindered its effectiveness.

Transition to Revenue Sharing Model

In 2016, the revenue-sharing model replaced the production-sharing contract (PSC) model under NELP. This new approach required companies to offer a higher share of production to the government. The aim was to simplify operations and reduce bureaucratic delays. The shift marked change in India’s exploration landscape.

Hydrocarbon Exploration and Licensing Policy (HELP)

HELP was introduced to address the limitations of NELP. It simplified the licensing process and provided greater flexibility for exploration activities. The policy aimed to reduce operational complexities and enhance transparency. Under HELP, revenue is shared based on pre-agreed percentages, regardless of costs incurred.

Open Acreage Licensing Policy (OALP)

OALP was launched in 2018 as part of HELP. It offered 144 blocks in eight bidding rounds, attracting USD 1.37 billion in exploration investments. This policy encouraged more companies to participate, leading to new discoveries. Currently, 128 of these blocks remain active.

Discovered Small Field (DSF) Policy

The DSF policy was introduced in 2015 to develop small and marginal fields. It aimed to monetise discoveries that were previously deemed economically unviable. Since its inception, 85 areas have been awarded, attracting investment for exploration and development.

Current Landscape and Future Prospects

As of now, only 29 blocks from the NELP rounds are active. In contrast, the majority of blocks awarded under OALP remain operational. The government’s focus on improving the Ease of Doing Business has led to a more competitive environment. Continuous reforms are anticipated to attract further investment in India’s oil and gas sector.

Questions for UPSC:

1. Critically analyse the impact of the NELP on India’s oil and gas sector.
2. What are the key differences between the NELP and HELP policies? Explain with examples.
3. What is the significance of the Discovered Small Field policy in enhancing India’s energy security?
4. Comment on the challenges faced by foreign investors in India’s upstream oil and gas sector.

Answer Hints:

1. Critically analyse the impact of the NELP on India’s oil and gas sector.

1. Attracted over $36 billion in investments, boosting exploration activities.
2. Resulted in 177 oil and gas discoveries, enhancing domestic production capabilities.
3. Facilitated participation of major international companies, bringing advanced technologies.
4. Challenges included delays in clearances and disputes over cost recovery, affecting project timelines.
5. Transitioned to HELP in 2016, indicating a need for policy reform to address inefficiencies.

2. What are the key differences between the NELP and HELP policies? Explain with examples.

1. NELP used a Production Sharing Contract (PSC) model, while HELP introduced a Revenue Sharing Contract (RSC) model.
2. NELP allowed cost recovery before profit sharing; HELP shares revenue based on pre-agreed percentages regardless of costs.
3. HELP simplified licensing processes and provided greater flexibility in exploration activities compared to NELP’s complexities.
4. NELP attracted $17.6 billion and led to 177 discoveries; HELP aims for greater operational efficiency and transparency.
5. HELP’s introduction was a direct response to the challenges encountered under NELP, seeking to create a more investor-friendly environment.

3. What is the significance of the Discovered Small Field policy in enhancing India’s energy security?

1. The DSF policy aims to monetize small and marginal fields, previously deemed economically unviable.
2. It has awarded 85 contract areas, leading to increased exploration and development investments.
3. Enhances energy security by tapping into underutilized resources, contributing to domestic production.
4. Supports national oil companies in optimizing existing discoveries, reducing reliance on imports.
5. Encourages participation from smaller players, diversifying the industry and promoting competition.

4. Comment on the challenges faced by foreign investors in India’s upstream oil and gas sector.

1. Delays in obtaining environmental and regulatory clearances can hinder project timelines.
2. Disputes over cost recovery and differing interpretations of contracts create uncertainty.
3. Bureaucratic complexities and operational inefficiencies can discourage foreign participation.
4. Market volatility and changing government policies may affect investment decisions.
5. Need for a transparent and stable regulatory framework to improve investor confidence.