BUSINESS

New hydrocarbon auction policy by fiscal-end: Pradhan

The Ministry proposed a new system by which natural gas produced from any hydrocarbon blocks in the future will have pricing and marketing freedom along the lines of that given to the 69 marginal fields announced earlier this year.  

Minister of State (Independent Charge) for Petroleum and Natural Gas Dharmendra Pradhan on Tuesday said that his Ministry aims to have a new auction policy for hydrocarbon blocks ready by the end of the current financial year.

“We have brought this consultation paper and suggestions will come in by November 30. We will make the policy after considering all the views and take it to the Cabinet. It will be our endeavour to make the policy during this financial year only,” Mr. Pradhan said on the sidelines of the Bio-Energy Summit 2015 organised by CII.

In the consultation paper released on Monday, which is open for public comment, the Ministry proposed a new system by which natural gas produced from any hydrocarbon blocks in the future will have pricing and marketing freedom along the lines of that given to the 69 marginal fields announced earlier this year.

“In the recently announced marginal field policy, the government has provided pricing and marketing freedom for the natural gas. On similar lines, it is proposed to provide pricing and marketing freedom for the natural gas to be produced from the areas to be awarded under the new contractual and fiscal regime in order to incentivise production from these areas,” the consultation paper said.

The policy for the marginal fields, announced by Mr. Pradhan in September, involves selling natural gas at market-determined prices rather than at prices determined by the government. In addition, oil and gas producers in these marginal fields were allowed to sell their hydrocarbons to any customer of their choice and not be bound by the government’s allocation policy. The new consultation paper seeks to bring this freedom to any future hydrocarbon blocks as well.

The consultation paper also proposes a unified licensing policy wherein the winner of a hydrocarbon block will be able to explore and extract any and all hydrocarbons in that block — including conventional hydrocarbons like oil and gas and unconventional hydrocarbons such as shale oil, shale gas and coal bed methane (CBM). This policy, too, was initially introduced for the 69 marginal fields, but could now be expanded to all future hydrocarbon block allocations if the proposal in the consultation paper are accepted.

The proposed policy also seeks to move away from the current cost recovery/production-linked payment system to a revenue sharing model. “Revenue, net of royalty (as applicable) will be shared between the contractor and the Centre based on the revenue accrued for oil and gas on a monthly basis,” the paper said.

In this model, the paper says, the bidders will bid the percentage of revenue that they will share with the government in two scenarios: one when the revenue is less than or equal to the lower revenue point and the second when the revenue is more than or equal to the higher revenue point.

The government’s percentage share of revenue at revenue points between the higher and lower revenue points will be ‘interpolated on a linear scale’, the paper said.

During the Bio-Energy Summit, Mr. Pradhan also said that lower crude oil prices would not alter India’s stance on increasing the share of renewable sources of energy in India’s energy mix.

He also said that bio-energy would provide as much as 20 GW of output compared to the 10 GW envisaged earlier by 2022.

“There should be a public discourse on the issue whether LPG subsidy should be given to higher income groups. We will take a decision on this,” Mr. Pradhan said. At the moment, the government is planning to stop providing LPG subsidy to consumers with an income above Rs.10 lakh a year.



The Ministry proposed a new system by which natural gas produced from any hydrocarbon blocks in the future will have pricing and marketing freedom along the lines of that given to the 69 marginal fields announced earlier this year.