India to Auction 69 Marginal Oil, Gas Fields

Indian government on Wednesday said it will auction 69 marginal oil and gas fields surrendered by state owned energy firms ONGC and Oil India.

These discoveries could not be monetized for many years due to various reasons such as isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime etc. 

“With appropriate changes in policy, it is expected that these fields can be brought into production,” the government said in a statement.

The government has made significant changes in the design of the proposed contracts. The earlier contracts were based on the concept of profit sharing. 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.

The second change is that the licence granted to the successful bidder will cover all hydrocarbons found in the field. Earlier, the licence was restricted to one item only (e.g. oil) and separate licence was required if any other hydrocarbon, for example, gas was discovered and exploited. The 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. 

This decision is expected to stimulate investment as well as higher domestic oil and gas production, the government stated.