The cabinet has finally approved the Marginal Fields Policy that will allow small and marginal fields from the nomination blocks of ONGC and OIL to be auctioned out through a competitive bidding process.
8These oil fields have not been developed earlier as they were considered as marginal fields, and hence were of lower priority.
8The bidding will be done on the basis of the government's share of the gross revenue from the sale of oil, gas and other hydrocarbon reserves in the fields.
8Importantly, the licence granted to the successful bidder will cover all hydrocarbons found in the field. Earlier, the licence was restricted to one item only (like gas or oil) and separate licence was required if any other hydrocarbon.
8The new policy for these marginal fields also allows the successful bidder to sell at the prevailing market price of gas, rather than at administered price.
Comment:This is clearly one of the best marginal field policies to come out. The parameters are clear and the government can step back and pick up a share of the gross revenues. No other questions asked. It is pertinent to note that it was a similar policy in 1992-93 which lead to the auctioning of medium and small fields that saw the likes of Cairn Energy, Videocon and RIL emerge as big players in the oil and gas business. Today there are a total of 28 contracts that produce close to 40000 BOPD of crude and around 7.5 mmscmd of gas emerging out of that policy format. The big advantage of the policy was that international price was given for crude oil. The government has now smoothened out the creases by offering royalty rates as applicable to the NELP regime. Another problem with the 1992-93 policy was that they were production sharing contracts which were subsequently mired in arbitration and litigation. This hurdle is now being bypassed by getting into a straight revenue sharing model with the contractor. Expect a big rush of bidders this time around.
For more details visit indianpetroplus.com
8These oil fields have not been developed earlier as they were considered as marginal fields, and hence were of lower priority.
8The bidding will be done on the basis of the government's share of the gross revenue from the sale of oil, gas and other hydrocarbon reserves in the fields.
8Importantly, the licence granted to the successful bidder will cover all hydrocarbons found in the field. Earlier, the licence was restricted to one item only (like gas or oil) and separate licence was required if any other hydrocarbon.
8The new policy for these marginal fields also allows the successful bidder to sell at the prevailing market price of gas, rather than at administered price.
Comment:This is clearly one of the best marginal field policies to come out. The parameters are clear and the government can step back and pick up a share of the gross revenues. No other questions asked. It is pertinent to note that it was a similar policy in 1992-93 which lead to the auctioning of medium and small fields that saw the likes of Cairn Energy, Videocon and RIL emerge as big players in the oil and gas business. Today there are a total of 28 contracts that produce close to 40000 BOPD of crude and around 7.5 mmscmd of gas emerging out of that policy format. The big advantage of the policy was that international price was given for crude oil. The government has now smoothened out the creases by offering royalty rates as applicable to the NELP regime. Another problem with the 1992-93 policy was that they were production sharing contracts which were subsequently mired in arbitration and litigation. This hurdle is now being bypassed by getting into a straight revenue sharing model with the contractor. Expect a big rush of bidders this time around.
For more details visit indianpetroplus.com
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