The government will auction 69 idle oil and gas fields of state-owned ONGC and Oil India to private firms on a new revenue sharing model, which will give the bidders pricing and marketing freedom.
The 69 small and marginal fields, which hold 89 million tonne of oil and gas resources worth Rs 70,000 crore at current rates, will be given to explorers offering the maximum revenue from hydrocarbon produced to the government. “This is a paradigm shift from the controversial production sharing contract (PSC) and cost recovery model to a more equitable revenue sharing model that protects government interest in both low oil and high oil price scenarios,” oil minister Dharmendra Pradhan said.
Bidders will be asked to quote the revenue they will share with the government at low and high end of the price and production band. “We are committed to our Prime Minister’s motto of minimum government, maximum governance. The new model will ensure that there is least government interference in the operations while also providing a fiscal and policy regime that encourages investments,” Pradhan said.
The government will allow companies to sell oil as well as natural gas produced from these fields at market price and with no restriction on who they sell the produce to.
While oil is priced at global benchmark currently, a complex international hub-based formula determines gas price, which is roughly half of the rate at which India imports gas.
Pradhan said the Cabinet approved auctioning of the fields that firms have surrendered because they were uneconomical due to the size, geography and state-set low sale prices. The new revenue sharing regime, which Pradhan hinted will also be followed in the next licensing round, will replace the PSC model where oil and gas blocks are awarded to those firms which show they will do maximum work. All their investments can then be recovered from sale of oil and gas before sharing profits with the government.
This model was criticised by CAG, which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government.
Asked if big international firms will show interest in the auction at a time when oil prices are at a six-year low, Pradhan said the government was targeting small companies with lean structure and sound technology.
Pradhan said a bid document will be brought out in three months after which the auction process will begin.
In all, Oil and Natural Gas Corp has 110 small and marginal oil and gas discoveries in the blocks or areas it got from the government on nomination basis. Of these, the firm has been allowed to retain 47 where some work has been done and the rest have to be surrendered. Oil India Ltd has surrendered all of its 6 small and marginal discoveries. Of the 69 fields to be auctioned, 36 are offshore and 33 onshore. Pradhan said the Cabinet decision is expected to stimulate investment and raise domestic oil and gas production.
— With PTI