The government of India approved a natural gas pricing system for gas produced from high pressure high temperature, deepwater and ultra deepwater areas that could attract substantial investment in the country’s upstream sector, as well as generate job opportunities.
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Image of India Prime Minister Shri Narendra Modi, from PMO India Twitter. |
India’s Ministry of Petroleum and Natural Gas, led by Prime Minister Shri Narendra Modi, approved the Hydrocarbon Exploration and Licensing Policy (HELP), and a policy permitting extension of production sharing contracts (PSCs) for small- and medium-sized discovered fields.
The guidelines will be applicable to future discoveries as well as existing discoveries that are yet to commence commercial production as of 1 January 2016.
The move is expected to improve the viability of some of the discoveries already made in such areas and also would lead to monetization of future discoveries as well. The reserves which are expected to get monetized are of the order of 6.75 Tcf or 190 Bcm or around 35 MMcum/d considering a production profile of 15 years, the ministry said.
India values the associated reserves at US$28.35 billion USD, with the country's present gas production being some 90 MMcum/d. In addition, there are also approximately 10 discoveries with potential yet to be established.
Aimed at enhancing transparency and reducing administrative discretion, the four main facets of HELP includes uniform licensing, open acreage policy, easy revenue sharing model and marketing and pricing freedom for hydrocarbons produced.
While uniform licensing will enable the contractor to explore conventional and unconventional oil and gas resources all under a single license, an open acreage policy will enable companies to choose blocks from designated areas.
Earlier contracts are based on the concept of profit sharing where profits are shared between the 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.
Therefore, under the new revenue sharing model, the government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of the product.
The policy which grants extension of PSCs for small and medium sized discovered fields includes 28 fields. For many of these fields the recoverable reserves are not likely to be produced within the remaining duration of the PSCs, the ministry said.
Moreover, some fields require capital intensive oil recovery techniques for additional hydrocarbon recovery, and that would extend beyond the current period of the PSCs as well. The Indian government’s share of profit during the extended period of contract will be 10% higher for both small- and medium- sized fields.
Some 15.7 MMT of oil and 20.6 MMT of oil equivalent of gas are likely to get monetized during the extended period, which could be worth approximately $8.25 billion. These reserves would require an additional investment of $3-4 billion however. The contract extensions is also expected to see longer employment periods and new job creations in construction and laying of facilities.
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