Even as the Petroleum Ministry is bracing up to showcase nearly 56 new oil and gas blocks during the forthcoming Petrotech 2014 conference under the new revenue sharing regime, the Vijay Kelkar Committee has favoured retaining the production sharing contract (PSC) system for the oil and gas exploration sector in the country.
The Ministry has proposed to put before national and international delegates the profile of these oil and gas blocks likely to be auctioned under the New Exploration Licensing Policy (NELP) round X. Although, the government has stated that it will issue the notice of bids under the revenue sharing regime next month only after the Cabinet grants its approval, the Kelkar Committee report is likely to further create confusion.
The committee, which submitted the first part of its report to Petroleum and Natural Gas Minister Veerappa Moily early this week, dwells on issues such as shifting to an open acreage regime, setting up a data repository, administering signed contracts and strengthening the Directorate-General of Hydrocarbons (DGH). The second part of the report is likely to be submitted next month.
The Kelkar Committee, sources in the Ministry said, had favoured the production sharing model for deep sea exploration because guarantees for the recovery of all sunk costs were important to attract oil majors with proprietary technology. Under the present regime, oil companies can recover all costs — of successful and unsuccessful wells — from sales of oil and gas before sharing profit with the government.
The Comptroller and Auditor General (CAG) had criticised the PSC regime on grounds that it encouraged companies to increase capital expenditure and delay the government’s share. The Rangarajan panel had last year suggested moving to a revenue sharing regime that required companies to state upfront the quantum of oil or gas they would share with the government from the first day of production.
The Kelkar panel, it is learnt, favours the revenue sharing model for shallow and on-land blocks that are less cost-intensive than deep sea exploration. It also reportedly calls for moving to an open acreage regime where companies can pick exploration areas through the year rather than wait for periodic auctions that offer areas identified by the government. To facilitate this, the panel has called for setting up a National Data Repository (NDR) that will preserve and promote the country’s natural resources data. It suggested administering PSCs without any changes and strengthening the DGH for better administration.
