Indian Government Revamps “Oil and Gas Exploration Rules”

The government will not charge any share of profit on less explored areas

• The Indian Government overhauls Oil and Gas exploration rules. The government has decided to bring a change in the policy to not charge any share of profit on hydrocarbons produced from less explored areas as it looks to attract the elusive private and foreign investment to raise domestic output.
• The Government is to break the two-and-a-half decade-old practice of having a uniform contractual regime for all sedimentary basins in the country. The new policy provides for different rules for areas that already have producing fields and ones where commercial production of oil and gas is yet to be established.
• India imports four out of every five barrels of crude oil it consumes and is likely to shell out more than $100 billion on oil purchases in 2018/19. The emphasis of the new rules is on attracting domestic and foreign investment in unexplored or unallocated areas of sedimentary basins, and enhances domestic production of oil and gas.

The new Revamped Rules of Oil and Gas exploration

• Under the new rules, producers will be given pricing and marketing freedom that is currently non-existent in natural gas blocks in India. Explorers will also be given financial incentives for early production from their blocks.
• The new policy provides for different rules for areas that already have producing fields and ones where commercial production of oil and gas is yet to be established.
• New rules provide complete marketing and pricing freedom for oil and gas in future bid rounds irrespective of the basins.
• Future bids for Oil and gas acreage or blocks will be awarded primarily on the basis of exploration work commitments.
• Companies are required to pay a share of revenue from oil and gas produced in Category-I sedimentary basins such as Krishna Godavari, Mumbai Offshore, Rajasthan or Assam where commercial production has already been established.
• Companies will be charged only prevalent royalty rates on oil and natural gas in the less explored Category-II and III basins.
• Further concessional royalty rates will be applicable if production is commenced within four years for on land and shallow water blocks and five years for deep water and Ultra-deepwater blocks from the effective date of the contract.
• Category-1 basins would be awarded on basis bided exploration work and revenue share in the ratio of 7:3.
• Category-II and Category III Basins will be awarded on the basis of international competitive bids based exclusively on the exploration work program.
• Irrespective of the basins, producers will get complete marketing and pricing freedom for
  oil and gas in future bid.

Basins and Categories in India

Sedimentary Basins of India
The existing 26 Sedimentary Basins have an area of approximately 3.14 million Sq. Kms. The sedimentary basins of the country have been classified into four categories as below.,

• Category-I: Basins with established commercial production (Viz) Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery, Assam Shelf and Assam-Arakan Fold Belt.
• Category-II: Basins with known accumulation of hydrocarbons but no commercial production achieved so far Kutch, Mahanadi-NEC (North East Coast) Basin, Andaman-Nicobar, Kerala- Konkan-Lakshadweep Basin.
• Category-III: Basins having hydrocarbon shows that are considered geologically prospective Himalayan
  Foreland Basin, Ganga Basin, Vindhyan basin, Saurashtra Basin, Kerela Konkan Basin, Bengal Basin.
• Category-IV: Basins having uncertain potential which may be prospective by analogy with similar basins in the world. Karewa basin, Spiti-Zanskar basin, Satpura–South Rewa–Damodar basin, Chhattisgarh Basin, Narmada basin, Deccan Syneclise, Bhima-Kaladgi, Bastar Basin, Pranhita Godavari basin, Cuddapah basin.

Category -1: Proven Commerical Productivity

Category -2: Identified Prospectivity

Category -3: Prospective Basins

Category -4: Potentially Prospective