New policy initiatives to boost hydrocarbon sector
Hydrocarbon Exploration Licensing Policy (HELP) brings in place a ‘uniform license’ initiative (single license) for exploration & production
The new revenue model proposed under the new policy intends to replace the present method where the production sharing is based on the recovery costsIn a progressive move, the Union Cabinet chaired by Prime Minister Narendra Modi on Friday, announced some major policy measures for domestic petroleum and hydrocarbon sectors.
These include approval of Hydrocarbon Exploration Licensing Policy (HELP), ensuring pricing and marketing freedom for gas produced from deep waters, high-temperature areas and a policy for grant of extension to Production Sharing Contracts (PSC) for small, medium-sized and discovered fields.
Through HELP, the government brings in place a ‘uniform license’ initiative (single license) for Exploration & Production (E&P) of all forms of hydrocarbons and a new revenue sharing model in line with ‘ease of doing business’.
The new revenue model replaces the present method where the production sharing is based on recovery costs.
“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,” said an official release.
“Whereas, 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,” the release added.
Addressing risky factors and cost concerns involved in E&P activities in offshore areas, the government has also decided to ensure fair royalty rates to those areas, which would be lesser than compared to those offered in the National Exploration Licensing Policy (NELP).
The government has come up with a graded system, where the royalty rates would gradually come down based on the area in the order: shallow water to deep water to ultra-deep water. Besides, in line with NELP, the government has also exempted imposition of import duty and cess on areal blocks allotted under the new policy, in tune with the slogan of ‘Minimum Government –Maximum Governance’.
An official release said, “New decisions will enhance domestic oil & gas production, bring substantial investment in the sector and generate sizable employment. The policies are also aimed at enhancing transparency and reducing administrative discretion.”
March 11, 2016 | 03:25pm IST
to success.