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Discovered small field (DSF) operators have written to the Directorate General of Hydrocarbons (DGH), seeking relaxations in revenue-sharing contracts (RSCs) and project execution timelines to cope with lower crude oil prices.
In its letter, the newly formed Association of Discovered Small Field Operators has sought a reduction in the Government of India’s share of revenue by at least 75 per cent. It has called for reducing the rate of royalty by 75 per cent, waiving the payment of dead rent and allowing contractors to use the facilities of national oil companies for the processing and transportation of oil and gas, free of cost.
DGH officials said the letter from the Association reached it on Monday and they are examining the requests.
“Most of us are small start-up companies with meagre and limited financial resources,” said the letter. “The present situation of unforeseen global drop in demand of oil and gas is certainly not conducive to encourage us to invest and move forward with the contractual obligations with the stipulated contractual terms. Oil and gas prices have touched a record low in the last few days owing to the devastating impact of Covid-19 worldwide and it is expected to continue for a long time.”
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Excess oil sans storage capacity in Gulf nations, plus the compulsions of futures trading, resulted in the rather baffling denouement of negative pricesThe Association represents, among others, DSF block operators such as Arsh Corporate Services, Invenire Energy, Ganges Geo Resources, Oilmax Energy, South Asia Consultancy and Sun Petrochemicals.
“The contractors contemplate a severely stressed economic and social environment and an unprecedented social order which is completely different from the conducive and anticipated environment prevalent at the time of evaluation of the small fields. Due to such a drastic change in the environment, the deferment of the projects and the future uncertainties, the contractors feel shaken to move forward with these projects, and appeal to the Government of India to revisit and reconsider few terms of the RSC,” the letter said.
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