Govt tightens norms for oil and gas exploration | business | Hindustan Times
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Govt tightens norms for oil and gas exploration

business Updated: Nov 05, 2007 23:13 IST
Deepak Joshi
Deepak Joshi
Hindustan Times
Highlight Story

In a tightening of provisions for the seventh round of New Exploration Licensing Policy (NELP-VII), the government has decided to make several changes in the model production sharing contract.

The changes proposed underlines government’s role in sale of oil and gas as well as ensuring quicker decision making in deciding the pricing formula.

The empowered committee of secretaries, headed by petroleum secretary M.S. Srinivasan has proposed that the production sharing contract should state that, “Until such time as the availability of natural gas from all petroleum production activities in India meets the total national demand as determined by the government, each company comprising the contractor, shall sell in the domestic market in India all of the company’s entitlement to natural gas from the contract area.”

In short, the contractor has a domestic sales obligation.

The government sees natural gas as the fuel of the future and would prefer to see that the commitments to core sector like power and fertilizer are fulfilled first.

The model production sharing contract provisions approved also state, ”If India attains self-sufficiency, during any year, the government shall advise the companies accordingly by a written notice. In such an event, domestic sale obligations shall be suspended for such period as may be specified by the government, and the company shall have the right to lift and export its participating interest share of natural gas during the said period, subject to any extant policy guidelines of the government, applicable from time to time.”

The government has also sought to allay fears of delays in deciding contentious issues like gas price formula. The spat between the Ambani siblings had made gas pricing formula a contentious issue in fixing formula for the Krishna-Godavari basin find of Reliance Industries Ltd.

“The formula or basis on which the prices shall be determined pursuant to Article 21.6 shall be approved by the government prior to invitation of price bids by contractor for the sale of natural gas to the consumers/ buyers, within 60 business days from the receipt of clarification/ additional information, where asked by the government. The price of natural gas arrived at through the approved formula/ basis will be applicable uniformly to all consuming sectors.”