MANU/PIBU/0363/2019

Department/Board : Press Information Bureau

Date : 20.02.2019

Government Drives Big Bang Reforms in Oil and Gas Sector

Decision incorporates recommendations made by Committee on Enhancing Domestic Oil and Gas Exploration

The Union Cabinet chaired by Prime Minister Shri Narendra Modi on Tuesday approved the Policy framework on reforms in exploration and licensing sector for enhancing domestic exploration and production of oil and gas.

The Cabinet decision was based on the recommendations of a High-powered Committee on Enhancing Domestic Oil and Gas Exploration chaired by Vice-Chairman NITI Aayog and including the Cabinet Secretary, CEO, NITI Aayog, Secretary, Ministry of Petroleum and Natural Gas, Secretary, Department of Economic Affairs and CMD, ONGC. The decision signals a paradigm shift in the core goal of the Government, moving from revenue-maximisation to production-maximisation, with focus on exploration. This will incentivise increased investment and production.

In Category I basins where potential is established and production is taking place, to give boost to further exploration in unexplored areas of these basins, the weightage of revenue sharing has been reduced from 50% to 30%. Also, in order to ensure that revenue sharing does not disincentivise higher production, the maximum revenue sharing has been capped at 50%.

In the less prospective Category II and Category III basins, revenue sharing has been totally dispensed with and allotment of basins would be solely based on the exploration work programme. On successful discovery, the production and full revenue will accrue to the operator, with Government asking for no share. This is apart from marketing and pricing freedom, which has been assured in all basins. Only in case there is windfall gain, and annual revenue exceeds USD 2.5 billion, government will take a share of additional revenue.

The Committee recommendations had focussed on liberalising exploration and production regime, enhancing production from existing producing fields of NOCs and simplifying the approval processes, all of which has been accepted by the cabinet.

The cabinet decision also gives complete marketing and pricing freedom to oil and gas production. In gas, it is also extended this to those fields whose first Field Development Plan (FDP) is yet to be approved. It also gives concession in the royalties in case the oil fields are brought to production earlier.

The production enhancement scheme for nomination field of National Oil Companies (NOCs) is likely to augment production by leveraging new technology, capital and management practices through private sector participation. The NOCs will be held accountable for enhancing production ........