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Government’s oil hunt policy, HELP delayed

In March, the government notified about the new Hydrocarbon Exploration Licensing Policy

Policy Pulse
Publish Date: Oct 31 2016 1:39PM | Updated Date: Oct 31 2016 4:17PM

Government’s oil hunt policy, HELP delayed

Hydrocarbon Exploration Licensing Policy (HELP) is likely to be delayed as the deadline for submitting bids for the marginal fields has been extended till the third week of next month. HELP is the government's plan to give marketing freedom in oil and gas sector.


In March, the government notified about the New Exploration Licensing Policy. The policy is supposed to set the bar for revenue sharing in oil and gas. The HELP round could get delayed because of bidding extension says a senior oil ministry official said.


“We were planning to have the auction under the Help model from early next year. However, with the extension of the bidding for marginal fields till November 21, it would be difficult to wrap up the process in the current year itself,” he said.


The new policy will mark the shift to a revenue-sharing model from the cost-recovery model.  The cost recovery model was criticised by the Comptroller and Auditor General of India (CAG) because of its inability to incentivise private contractors to reduce capital expenditure.


At present, companies recover all of their investments before sharing the profit with the Centre. The government is offering 46 contract areas with 67 oil and gasfields, estimated to hold over 625 million barrels of oil and oil equivalent gas and spread over 1,500 sq km.


The small and marginal fields relinquished by ONGC and Oil India are being offered for bidding on simpler contractual terms together with pricing and marketing freedom. According to C. Rangarajan report, the company offering the highest share will get the block.


Though a shift to the new regime may not result in additional revenues for the government, it will ensure that the Centre gets higher revenues when the companies earn more. It will also safeguard the government's interests in case of a windfall arising from a price surge or a surprise discovery.