Faced with a steep decline in oil prices, which makes oil and gas exploration and production an unviable business, domestic oil and gas producers are seeking government support to mitigate the impact.

“The government should focus on giving domestic oil and gas producers some relief by waiving off levies on production. The taxes imposed by the State and Centre go up to 50 per cent of the total sale price of domestically produced crude oil. When coupled with profit petroleum, these levies end up being even higher,” said P Elango, Managing Director of Hindustan Oil Exploration Company.

“The correct approach is to keep domestic oil and gas prices linked to the international market. Domestic producers that can survive at the present prices will be able to gain substantially when there is a recovery,” he said.

The domestic oil industry is also seeking a share of the funds accrued from the Oil Industry Development Board (OIDB) cess collections. “The cess collections are now close to ₹1 lakh crore. This fund was set up with the purpose of supporting the domestic industry and this is the right time for it,” an oil sector official said.

While large oil sector players have their demands in place, newer and smaller exploration companies have formed a separate forum for themselves. The newly formed Association of Discovered Small Field Operators has written to the Directorate General of Hydrocarbons seeking concession for themselves.

“The need for this new association came up because the larger players dominated discourse at the Association of Oil and Gas Operators (AOGO). Even medium sized players felt left out,” a new entrant in the domestic oil exploration business said.

The new association is firming up its list of demands from the government. Among those under deliberation were a minimum purchase price for domestically produced crude oil to support the domestic industry.

Related Topics