In a significant decision for the oil and gas sector, the Union Cabinet on Wednesday gave its approval for shifting to a revenue sharing model for the auction of 69 marginal fields of ONGC and Oil India.
Petroleum and Natural Gas Minister Dharmendra Pradhan said that the move to a revenue sharing model is a paradigm shift from the prevailing profit sharing contract regime and could be implemented for future oil fields too.
It will be applicable for all future hydrocarbon fields that will be auctioned.
"We are serious about maximum governance and minimum government. With the move to a revenue sharing model, Government interference will reduce," said Pradhan.
ONGC, Oil India blocks
Meanwhile, the Cabinet also approved auction of 69 marginal fields owned by national hydrocarbon exploration and production companies.
These fields are partially explored and have 89 million tonne of oil and gas reserves.
The fields will be auctioned and the winning bidder will be given a uniform licence to explore conventional and non-conventional sources of hydrocarbon which includes oil, gas, shale oil, shale gas and even coal bed methane if it is available.
Uniform licence
The uniform licence will only be applicable for the marginal fields and Pradhan said the aim is to conclude the auctions in the next three months.
Uniform licensing policy for other hydrocarbon fields will be decided upon later, said a Petroleum and Natural Gas Ministry official.
Apart from a unified licence, the winning bidder will also be allowed to sell oil and gas from these fields at market prices. Pradhan said that there will also be no allocation restriction on the oil and gas from these fields.
Winners for these fields will be given a 20-year licence.
"There is a resource of ₹70,000 crore in these fields that have not yet been utilised. Estimated annual production from these fields is to the tune of ₹3,500 crore," said Pradhan.
Fields to be auctioned
Out of the 69 fields, 63 are of ONGC and 6 are of Oil India. Both companies can, if they chose to, participate in the auctions, a senior Petroleum and Natural Gas Ministry official said.
Winners of onshore fields will have to start production in 3 years from the effective date of handover, shallow fields will have to start production in 4 years and deep water fields in 6 years.
"While we have given the deadlines for production, some fields can start production in a year and half. Oil production can start quicker but gas may take time as necessary infrastructure needs to be present," the official said.
Commenting on the reserves, the official added that 89 million tonnes is from the initial exploration of these marginal fields. "Exploration can continue for the duration of the license so the reserves can go up. In fact in the current crude oil price environment, it is better to undertake exploration as all services are cheaper," the official said.