CIVIL

Hydrocarbon Exploration and Licensing Policy (HELP) 2016

Hydrocarbon Law

 

Press Information Bureau
Government of India
Cabinet
10-March-2016 14:50 IST

Hydrocarbon Exploration and Licensing Policy (HELP)

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the Hydrocarbon Exploration and Licensing Policy (HELP).

Four main facets of this policy are:-

  1.   Uniform license for exploration and production of all forms of hydrocarbon,
  2.  An open acreage policy,
  3.   Easy to administer revenue sharing model and
  4.    Marketing and pricing freedom for the crude oil and natural gas produced.

 The decision will enhance domestic oil & gas production, bring substantial investment in the sector and generate sizable employment. The policy is also aimed at enhancing transparency and reducing administrative discretion.

The uniform licence will enable the contractor to explore conventional as well as unconventional oil and gas resources including CBM, shale gas/oil, tight gas and gas hydrates under a single license.  The concept of Open Acreage Policy will enable E&P companies choose the blocks from the designated area.

Present fiscal system of production sharing based on Investment Multiple and cost recovery /production linked payment will be replaced by a easy to administer revenue sharing model. The earlier contracts were based on the concept of profit sharing where profits are shared between Government and the contractor after recovery of cost. Under the profit sharing methodology, it became necessary for the Government to scrutinize cost details of private participants and this led to many delays and disputes. Under the new regime, the Government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc. This is in tune with Government’s policy of “Ease of Doing Business”.

Recognising the higher risks and costs involved in exploration and production from offshore areas, lower royalty rates for such areas have been provided as compared to NELP royalty rates to encourage exploration and production.  A graded system of royalty rates have been introduced, in which royalty rates decreases from shallow water to deepwater and ultra-deep water. At the same time, royalty rate for onland areas have been kept intact so that revenues to the state governments are not affected. On the lines of NELP, cess and import duty will not be applicable on blocks awarded under the new policy.  This policy also provides for marketing freedom for crude oil and natural gas produced from these blocks.  This is in tune with Government’s policy of “Minimum Government –Maximum Governance

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1997 Policy

New Exploration Licensing Policy (NELP) 1997

Government of India formulated a policy called New Exploration Licensing Policy in 1997. The main objective was to attract significant risk capital from Indian and Foreign companies, state of part technologies, new geological concepts and best management practices to explore oil and gas resources in the country to meet rising demands of oil and gas. This policy, NELP was approved in 1997 and it became effective in February, 1999 Since then licenses for exploration are being awarded only through a competitive
bidding system and National Oil Companies (NOCs) are required to compete on an equal footing with Indian and foreign companies to secure Petroleum Exploration Licences (PELs). Nine rounds of bids have so far been concluded under NELP, in which production sharing contracts for 254 exploration blocks have been signed. The salient features of NELP are as under:

i) 100% FDI is allowed under NELP
ii) No mandatory state participation through ONGC/OIL or any carried interest of the Government.
iii) Blocks to be awarded through open international competitive bidding.
iv) ONGC and OIL to compete for obtaining the petroleum exploration licenses on a competitive basis instead of the existing system of granting them PELs on nomination basis.
v) ONGC and OIL to get the same fiscal and contract terms as private companies.
vi) Freedom to the contractors for marketing of crude oil and gas in the domestic market.
vii) Royalty at the rate of 12.5% for the onland areas and 10% for offshore areas.
viii) Royalty to be charged at half the prevailing rate for deep water areas beyond 400 m bathymetry for the first 7 years after commencement of commercial production.
ix) Cess to be exempted for production from blocks offered under NELP.
x) Companies to be exempted from payments of import duty on goods imported for petroleum operations.
xi) No signature, discovery or production bonuses.
xii) A Model Production Sharing Contract (MPSC) which is reviewed for every NELP round.
xiii) Contracts to be governed in accordance with applicable Indian Laws.

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