Union Cabinet approves MFP for Development of Hydrocarbon discoveries
Union Cabinet has approved Marginal Fields Policy (MFP) to aunction small and marginal unexploited hydrocarbon discoveries by state owned oil companies.
Decision in this regard was taken by Union Cabinet Meeting chaired by Prime Minister Narendra Modi in New Delhi.
Key facts about Marginal Fields Policy (MFP)
- 69 unexploited oil fields owned by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will be opened for competitive bidding to private and foeign companies based on revenue sharing model.
- These discoveries for many years were not able to monetize due to isolated locations, small size of reserves, technological constraints, high development costs and fiscal regime.
- These discovered oil fields were considered as marginal fields as they were not developed and thus were of lower priority.
- Private exploration companies will be able to submit bids for exploiting these oil fields.
- The policy allows the successful bidder to sell these oil fields at the prevailing market price of gas, rather than at an administered price.
It should be noted that this is first time revenue sharing model introduced in oil sector.
Implication: This decision is expected to stimulate investment in oil exploration sector as well as increase domestic oil and gas production. It will also help in monetizing 70,000 crore rupees worth of resources form these unexploited oil fields
Earlier Methodology: The earlier exploration contracts were based on the concept of profit sharing model. Under this method it had become necessary for the government to scrutinize cost details of private participants which had resulted in delays and disputes.
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Month: Current Affairs - September, 2015