The union cabinet on Thursday approved a new Hydrocarbon Exploration and Licensing Policy (HELP) aimed at boosting investments in the oil and gas sector.
In a first, the government has allowed marketing and pricing freedom for the crude oil and natural gas produced by a developer. Under NELP or New Exploration and Licensing Policy, the project developers were free to enter into contracts for selling oil or gas, but allocations were determined by the government.
Under the new policy a developer can explore and produce all forms of hydrocarbons under one license. The different forms of hydrocarbons will include oil, gas, shale gas, coal-bed methane etc.
In a big shift from the earlier exploration policy, the production sharing between the government and the developer will be based on a revenue-sharing model wherein the government will receive a share of the gross revenue from the sale of oil and gas after the explorer recover his costs. The government will no longer need to scrutinise the details of costs incurred by the developer; a provision that led to several disputes.
The Cabinet also approved a pricing formula for natural gas produced from deep sea and difficult-to-explore geological areas. The formula, which will allow companies to recover costs more easily, will be a shot in the arm for companies such as ONGC and RIL that have deep sea gas fields. It will not be applicable already running projects.
The price will be calculated using prices of imported coal, liquified natural gas and naphtha.
The Cabinet also extended licenses of 28 small- and medium-sized oil and gas fields that were due for renewal.