The Union Cabinet, chaired
by the Prime Minister Shri Narendra Modi, has approved the Hydrocarbon
Exploration and Licensing Policy (HELP).
Four main facets of
this policy are:
i.
uniform license for exploration and production
of all forms of hydrocarbon,
ii.
an open acreage policy,
iii.
easy to administer revenue sharing model and
iv.
marketing and pricing freedom for the crude oil
and natural gas produced.
The decision will enhance
domestic oil & gas production, bring substantial investment in
the sector and generate sizable employment. The policy is also aimed at enhancing
transparency and reducing administrative discretion.
The uniform
licence will enable the contractor to explore conventional as well as
unconventional oil and gas resources including CBM, shale gas/oil, tight gas
and gas hydrates under a single license. The concept of Open Acreage Policy
will enable E&P companies choose the blocks from the designated area.
Present
fiscal system of production sharing based on Investment Multiple and cost
recovery /production linked payment will be replaced by a
easy to administer revenue sharing model. The
earlier contracts were based on the concept of profit sharing where profits are
shared between Government and the contractor after recovery of cost. Under the
profit sharing methodology, it became necessary for the Government to
scrutinize cost details of private participants and this led to many delays and
disputes. Under the new regime, the Government will not be concerned with the
cost incurred and will receive a share of the gross revenue from the sale of
oil, gas etc. This is in tune with Government’s policy of “Ease of Doing
Business”.
Recognising
the higher risks and costs involved in exploration and production from offshore
areas, lower royalty rates for such areas have been provided as compared to
NELP royalty rates to encourage exploration and production. A graded system of
royalty rates have been introduced, in which royalty rates decreases from
shallow water to deepwater and ultra-deep water. At the same time, royalty rate
for onland areas have been kept intact so that revenues to the state
governments are not affected. On the lines of NELP, cess and import duty will
not be applicable on blocks awarded under the new policy. This policy also
provides for marketing freedom for crude oil and natural gas produced
from these blocks. This is in tune with Government’s
policy of “Minimum Government –Maximum Governance”
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AKT/BVA/SH