While the Government has sought comments from Directorate General of Hydrocarbons (DGH), ONGC and Oil India ltd (OIl) on its proposed uniform policy for hydrocarbon acreages which calls for inclusion of unconventional natural resources like shale oil and gas, a strong pitch has been made for a new contractual system which would be based on revenue sharing model instead of the existing profit sharing system. Petroleum Ministry is keen on introducing this system by early next year prior to the next round of bidding of oil and gas blocks.
According to sources privy to the development, the Petroleum Ministry is keen to shift to the revenue sharing model in the new uniform policy for hydrocarbon acreages, as under this regime the share of revenue to the Government will commence from the first day of production unlike the present profit sharing model where profit to the Government starts only when all contract costs have been recovered.
A senior official told The Pioneer that though comments are currently being sought from various stakeholders on the entire policy as well as the contractual system, the aim is to implement it before the 10th round of the New Exploration licensing Policy (NElP) which is likely to introduced early next year. Also with lok Sabha polls just a few months away, the Government is keen to introduce this new regime as through this it plans to achieve the broad objective of efficiency in oil field operations and at the same time conserve hydrocarbon resources.
The comments from all the stakeholders are likely to be received by December and sources said that if all goes along smoothly, efforts would be made to seek Cabinet's clearance on the new regime as soon as possible so that it can be implemented by next year prior to the new round of NElP bids. The sole aim of the new uniform licensing policy, according to sources, is to ensure that there is uniformity in contractual provisions for exploration and production of all kind of hydrocarbons as well as in individual acreage, since operators would have freedom to explore all types of hydrocarbon resources. At the same time it will help remove impediments on account of multiple operators thus expediting exploration. The revenue sharing model for which the Government is pitching, would not be directly sensitive to fluctuations in costs in determining the Government's profit share, unlike the existing profit sharing system. The new model enhances the incentive for the contractor to keep the costs down.
This model also reduces efforts and time in examining and monitoring by the Management Committee of the reserve. Rather it would enable greater concentration on monitoring of technical aspects for effective exploration and optimal exploitation of reservoirs. In addition to this, the new model sources said, is much more flexible and investor-friendly in comparison with the systems adopted in neighbouring countries of South-east Asia like Myanmar and Indonesia which follow much more rigid cost-recovery mechanism.
Petroleum Ministry sources exuded confidence that allowing companies the option of bidding the production share at various production levels and oil price tranches would not give the contractor any scope of complaining about toughness of terms as these would be determined by the market place and allow bidders to factor in the fiscal terms of contract.