Over the past year, India’s oil and gas sector has witnessed a number of noteworthy developments in terms of simplified regulations for ease of operations. These include the introduction of the Hydrocarbon Exploration and Licensing Policy (HELP), the Discovered Small Fields [DSF] Policy and the Open Acreage Licensing Policy (OALP). Besides, the government has also made notable changes in the bidding guidelines for the city gas distribution (CGD) segment in order to unlock its potential. However, the bidding process has been affected by the lockdown on account of the ongoing pandemic, thereby pushing out the timelines.
In the past 12-18 months, bidding rounds have been held under the OALP and the DSF Policy to give a leg-up to domestic oil and gas output. As of June 2020, four rounds have been successfully conducted under the OALP. A total of 94 exploration blocks have been awarded, covering an area of approximately 136,790 square km. The last date for bidding in the fifth round, with 11 oil and gas blocks on offer, had been extended to June 10, 2020. The round opened in January 2020 and was initially supposed to close by March 2020 and then by April 16, 2020, before it was extended further. The Directorate General of Hydrocarbons (DGH) has also decided to merge the expression of interest cycle for Rounds VI and VII. The merged round will be launched based on bids submitted till July 31, 2020.
Further, the first round under the DSF Policy was launched in May 2016, offering 67 fields clubbed into 46 contract areas for international bidding. In March 2017, 30 contracts were signed for 43 fields. In-place locked hydrocarbon reserves of 40 million tonnes (mt) of oil and 22 billion cubic metres of gas are expected to be monetised from these fields over a period of 15 years. In February 2018, the government launched the second round of bidding under the DSF Policy. In this round, 59 DSF fields estimated to have 189.61 mt of oil and oil equivalent gas were put on offer. A total of 23 contracts comprising 57 DSF fields were signed in March 2019.
The ninth and tenth rounds of CGD auctions received an enthusiastic response from the industry. So far, a total of 136 new geographical areas (GAs) have been awarded to CGD entities. In addition, the Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed 44 new GAs under the upcoming 11th round of CGD bidding. This will extend the supply of compressed natural gas to automobiles and piped cooking gas to household kitchens in 475 districts from the current 400. The 11th round of bidding that was due to be announced in April 2020 has also been deferred till further notice from the PNGRB.
The improved performance of the sector can be attributed to the government’s supportive policy measures and proactive reforms in the past few years. In March 2020, as part of the economic relief package for COVID-19, the government announced that over 80 million beneficiaries under the PradhanMantriUjjwalaYojana would be entitled to three free 14.2 kg liquefied petroleum gas cylinders during April-June 2020. Further, the Ministry of Finance moved an amendment to the Finance Bill, 2020, to raise the limit up to which the government can raise the special excise duty on petrol and diesel to Rs 18 per litre and Rs 12 per litre respectively. Recently, in April 2020, the DGH also simplified the exploration and production procedures for oil and gas by permitting self-certification for a host of compliances including the discovery notification and deemed consent for investment in fields within a stipulated time frame. In May 2019, the Ministry of Petroleum and Natural Gas had notified guidelines for the sale of biodiesel for blending with diesel used for transportation. The National Policy on Biofuels, 2018, has set a target of achieving 5 per cent blending of biodiesel in diesel by 2030 to promote the use of alternative and environment-friendly fuels.
Later, in October 2019, the Union cabinet approved revised guidelines for granting authorisation to market transportation fuels. Earlier, authorisation to market these fuels was only available to companies investing a minimum of Rs 20 billion in exploration and production, refining, pipelines or terminals. The revised policy has reduced this threshold to Rs 2.5 billion. Besides, non-oil companies are also permitted to invest in the retail sector. The government has further introduced simplified norms for production sharing contracts and for pre-New Exploration Licensing Policy (NELP) and NELP oil and gas blocks. In order to make business easier, it has been consistently taking steps to provide the necessary relaxations for the smooth functioning of the oil and gas sector.