New Delhi, Sept 3: The government has decided to auction 69 idle oil and gas fields of state-owned ONGC and Oil India to private firms on a new revenue sharing model and liberalised terms including pricing and marketing freedom.
According to reports, the 69 small and marginal fields holding 89 million tonne of oil and gas resources, worth Rs 70,000 crore at current rates, will be given to explorers offering the maximum revenue from hydrocarbon produced to the government.
Oil Minister Dharmendra Pradhan on Wednesday reportedly said: “This is a paradigm shift from the controversial production sharing contract (PSC) and cost recovery model to a more equitable revenue sharing model that protects government interest in both low oil and high oil price scenarios.”
Bidders will be asked to quote the revenue they will share with the government at low and high end of price and production band to capture windfall of steep rise in prices as well as quantum jump in production.
Pradhan said: “We are committed to our Prime Minister’s moto of minimum government, maximum governance. The new model will ensure that there is least government interference in the operations while also providing a fiscal and policy regime that encourages investments.”
Pradhan said the Cabinet on Wednesday approved auctioning of the fields that state-owned firms have surrendered because they were uneconomical due to size, geography and state-set low sale prices.
The government will allow companies to sell oil as well as natural gas produced from these fields at market price and with no restriction on who they sell the produce to.
While oil is priced at global benchmark currently, a complex international hub based formula determines gas price, which is roughly half of the rate at which India imports gas.
The new revenue sharing regime, which Pradhan hinted will also be followed in the next licensing round, will replace the PSC model where oil and gas blocks are awarded to those firms which show they will do maximum work. All their investments can then be recovered from sale of oil and gas before sharing profits with the government.
(With Agency Inputs)