Indian government is planning to frame new rules for the pricing and marketing of oil and gas exploration blocks to be awarded under the eighth edition of New Exploration Licensing Policy (NELP-VIII), Economic Times reported. As per the new terms, the government will have equal right along with the winning bidders to set the sales price of the gas.
The government will also select a purchaser of the gas and how much quantity will it get under the new rule.
As per the current production sharing contracts (PSC), the operators of oil and gas fields are free to set the price which will be granted by the government and are free to market the production.
Due to a blazing row between Ambani brothers and the government over the sharing and pricing of gas from the Krishna-Godavari basin, the news rules have been framed.
“The price set and the supplies will have to be reviewed from time to time keeping in mind the demand- supply condition and volatility in the prices,” the official said, adding that the restrictive rules will be in place until the country has enough gas to meet needs for infrastructure.
A single price will be set for commercial sales and calculating the government’s share in petroleum, a share of the earnings that the exploration company gives to the government from its sales revenue.
The official argued that “This is like going back to a controlled pricing regime. Call it APM (administered pricing mechanism) gas. Its a retrograde step going back to license and control raj.”
“The NELP-VIII round is doomed. Most oil companies would not want to touch India’s exploration and production sector with a barge-pole at this point,” observed a member of the board of one of India’s leading oil companies.
Director general of hydrocarbons V K Sibal said “we would like to ensure transparency and keep the norms investor-friendly” but declined to comment on the new rules. The oil ministry has asked the upstream regulator — the Directorate General of Hydrocarbon (DGH) run by Mr Sibal — to initiate the process to remove “ambiguity” from the existing model production sharing contract (PSC).
“It is not unusual. The model PSC has undergone several changes since NELP-I when it was launched. The intention is to simplify its language and have specific provisions,” another official in the oil ministry said.