OALP offers companies an opportunity to carve their own blocks, based on data analysis. Once they send their expressions of interest (EOIs), the areas are put for bidding. As of November, 55 areas across 59,000 sq km had been identified and will be put for bidding.
“Even if 10 per cent of the area that has attracted EoIs under OALP goes into exploration, a large part of area will go under exploration. Unlike NELP (the earlier New Exploration and Licensing Policy), where companies had huge blocks but the area under exploration is just about 8,000 sq km,” said the official.
Besides the two sets of auctions, DSF and the OALP round which is currently open, the 2016 extension policy for oil and gas blocks given out in the 1990s under the production sharing contract (PSC) regime is also seeing some movement. A senior official told Business Standard the PSC for one block operated by US-based Joshi Technologies (JTI) has been extended. In 1995, JTI entered into a PSC with the government to develop the Dholka and Wavel fields in Gujarat. As of June 2017, the Dholka field produced about 820 barrels of oil equivalent per day (boe/d), of 760 barrels of oil and 0.8 million cubic ft of gas per day (equivalent to 60 boe/d). Wavel produced about 55 barrels of oil per day and JTI’s total current production is about 875 boe/d.
With oil price on rise, investment in oil exploration can again become attractive though investment in hydrocarbons continues to be muted globally. When the United Progressive Alliance government conducted the last round of auction under NELP in October 2010, crude oil price benchmarked to the Indian basket was $81 a barrel. By the time bids were submitted and winning bidders were finalised, the price rose to $111 in March 2011. It has averaged to $54 a barrel for the first nine month of 2017-18.
Extension is being sought for over a dozen PSCs. “We expect all of the 28 PSCs to seek extension under the policy, except for the Panna, Mukta, and Tapti (PMT) fields which we plan to give out in subsequent DSF rounds,” said an official. The PMT fields were operated by a consortium of Reliance Industries, British Gas (now merged with Shell) and Oil and Natural Gas Corporation (ONGC).
The DSF round gives 80 per cent weight to revenue share and 20 per cent to the minimum work programme. Companies are required to start production within three years of getting the contract. They will have to relinquish the area if there is any discontinuation of production for more than a year.
Under the earlier NELP, bidders were primarily judged on the minimum work programme (MWP), a schedule for number to wells to be drilled over the contract period. It carried 50-60 per cent weight. The rest was for the government share in profit petroleum (value of output after costs have been recovered).
The processes and contract terms have been simplified to minimise the subjectivity that came with the management committee set-up under NELP, say officials.
Under HELP, the royalty on oil and gas from onland blocks has been retained at 12.5 per cent and 10 per cent as in NELP but shallow water fields have to pay 7.5 per cent. Contract areas in deep and ultra-deep waters do not pay royalty for the first seven years; after this, they have to pay at a rate of five per cent and two per cent, respectively.
A total of 60 fields with estimated reserve of 194.65 million tonnes of oil and oil equivalent would be offered in DSF Round-II, which like the first round will also have blocks that earlier belonged to ONGC and Oil India. Twenty two of these blocks belong to ONGC, five to Oil India, 21 were not picked up in the first round and 12 are from relinquished fields or discoveries from the NELP regime.
DSF-I had offered 67 fields of ONGC and Oil India, clubbed into 46 contract areas, with reserve of about 80 million tonnes of oil equivalent.
Production sharing based on pre-tax investment multiple and cost recovery has been replaced with revenue share Govt share to be calculated on crude price linked to Indian basket/notfied gas price Pricing and marketing freedom for both oil and gas. Source: Petroleum Ministry