India’s Ministry of Petroleum and Natural Gas has recently launched the sixth bid round under the liberal Open Acreage Licensing Programme (OALP) in order to spur domestic hydrocarbon production. This move follows the approval by the Cabinet Committee on Economic Affairs (CCEA) of a new policy framework focused on reforms within the exploration and licensing sector. The goal is to stimulate domestic exploration and production of oil and gas.
About the Policy Framework
The Hydrocarbon Exploration and Licensing Policy (HELP), which replaced the New Exploration Licensing Policy (NELP), was approved in March 2016. This was followed by the launch of the Open Acreage Licensing Policy (OALP) and the National Data Repository (NDR) in June 2017. These initiatives were created as central drivers to speed up Exploration and Production (E&P) operations in India.
Under the OALP, businesses have the opportunity to select the areas they wish to explore for oil and gas production. Companies can submit an expression of interest (EOI) throughout the year for any area, with these interests gathered three times annually. The chosen areas are then made available for bidding.
Need for the OALP
India is one of the world’s fastest-growing major economies and the third-largest consumer of petroleum products, after the U.S. and China. It relies heavily on crude oil imports to meet energy needs. To mitigate this, India has set a goal to reduce its dependence on crude oil imports by 10% by 2022.
Benefits of the Policy
The effective implementation of HELP, followed by OALP Bid Rounds, has resulted in an increase in exploration acreages in India. Additionally, the OALP has helped reduce bureaucracy and has led to significant advancements in the Exploration & Production sector.
Concerns Over the Policy
Despite these advantages, there have been concerns. The new policy has failed to attract significant interest from major sector players. Additionally, the OALP provides the Directorate General of Hydrocarbon (DGH) with discretionary powers to accept or modify areas for which Expressions of Interest have been submitted after evaluation.
About HELP
The Hydrocarbon Exploration & Licensing Policy (HELP), which follows the Revenue Sharing Contract model, is a considerable step towards enhancing the ‘Ease of Doing Business’ in India’s Exploration and Production (E&P) sector. From Bid Round-IV onwards, bidding rounds are conducted under further liberalized policy terms.
Way Forward
Taking these considerations into account, the government should consider rationalizing Taxation and Cess and should consult with various stakeholders to understand their concerns. Both private and foreign players should be incentivized to introduce better technology. It’s clear that these policies represent a significant shift in India’s approach to hydrocarbon exploration, and time will tell if they are successful in their goals of increasing domestic production and reducing dependence on imports.
