July 1 will not only be about the biggest indirect direct tax reform — the Goods and Services Tax — but also about a new kid on the block in India’s hydrocarbon space: Open Acreage Licensing, which allows companies to cherry-pick their own areas for exploration.
Like GST, OAL, another policy initiative of the previous UPA government, will be offered under the Hydrocarbon Exploration Licensing Policy. OAL will also mean the end of the story for the existing auction mechanism, the New Exploration Licensing Policy (NELP).
Officials associated with the process say that if the trial run is anything to go by, OAL has already attracted the Exxons of the world, who have been keeping India low on their oil and gas exploration priority list.
However, a question being asked is why the government is going ahead with OAL now, when blocks awarded under NELP, including the controversial Reliance Industries-BP Krishna Godavari Basin-D6 block, are showing results?
Since NELP was introduced in the late 1990s, 314 blocks have been offered, of which 254 have been awarded. Besides, at present, most of the producing blocks in the country are those that have been offered before NELP or after NELP.
OAL is intended to cut the red tape and plug the gaps in the NELP model, a senior official in the Ministry for Petroleum and Natural Gas told BusinessLine.
A prerequisite for OAL is the National Data Repository (NDR) to be unveiled by Finance Minister Arun Jaitley on June 28.
“All the data will be made available on NDR, which will be the backbone of OAL. To be manned by the Directorate-General of Hydrocarbons, OAL will offer 2.7 million sq km of Indian sedimentary basin out of the total 3.14 million sq km available in NDR,” the official added.
The NDR will be made operational immediately and OAL will roll out from July 1, on expression of interest basis. “Companies will be allowed to submit their EoI (expression of interest) till November 15, and within a month, the notice of inviting offer will be put out.
Then, in a month or so, bids will be invited. The bid evaluation will be based on minimum-work programme and revenue-sharing model,” the official said.
Contracts could be awarded in March-April next year and May 2018 is the target to sign the contracts. OAL is an ongoing cycle, so when the first lot goes out, parallely the companies would be looking at other areas. However, there will be a cap on the number of areas they can carve out.
With OAL, the government also hopes to win back the trust of the companies in the business as it will allow the players to choose their own areas and carve out their own blocks with pricing and marketing freedom. However, they will have to work under the revenue-sharing model, unlike NELP, which was based on cost recovery.
When asked what happens to the blocks that have already been contracted for under NELP and prior to the NELP regime, the official said those contracts would co-exist with OAL. Only those areas that have been surrendered or not already awarded are being put on offer in OAL.
Stating that enough checks and balances have been put in place to ensure data security, the official said the server will be physically in DGH hands and there are enough firewalls. To access the data, the companies will have to pay a nominal price, which will be announced once the NDR is unveiled.
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