Govt Overhauls Oil, Gas Exploration Permits

The government has overhauled the rules for the oil and gas exploration permits. The Ministry of Petroleum and Natural Gas has released the new rules for oil and gas exploration permits:

  • New rules make a departure from the from the two-and-a-half decade-old practice of having a uniform contractual regime for all sedimentary basins in the country.
  • The new policy provides for different rules for areas that already have producing fields and ones where commercial production of oil and gas is yet to be established.
  • New rules provide complete marketing and pricing freedom for oil and gas in future bid rounds irrespective of the basins.
  • Future bids for Oil and gas acreage or blocks will be awarded primarily on the basis of exploration work commitment.
  • Companies are required to pay a share of revenue from oil and gas produced in Category-I sedimentary basins such as Krishna Godavari, Mumbai Offshore, Rajasthan or Assam where commercial production has already been established.
  • Companies will be charged only prevalent royalty rates on oil and natural gas in the less explored Category-II and III basins.
  • Further concessional royalty rates will be applicable if production is commenced within four years for onland and shallow water blocks, and five years for deep water and Ultra-deepwater blocks from the effective date of the contract.

The new rules are being introduced to increase exploration activities, attract domestic and foreign investment in unexplored and unallocated areas of sedimentary basins, and enhance domestic production of oil and gas.

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