Oil & gas explorers with small fields to double the existing profit share to government
There would be a separate policy for large fields such as Cairn India's Rajasthan block and Reliance Industries' KG-D6 block.
There would be a separate policy for large fields such as Cairn India's Rajasthan block and Reliance Industries' KG-D6 block. The immediate policy formulation is for the contracts for over two dozen small and medium fields where firms such as Cairn India, Reliance Industries, BG and Hardy Oil hold stakes, would expire in the next few years. The government is formulating a policy for extending the contracts instead of negotiating individual cases.
"The rationale behind higher share in profit is simple. Contractors have already recovered their expenditures and made profits in last 20-25 years. Any output beyond this period is like windfall gain. Hence, the government has rights to get biggest chunk of the profit from these fields," a government source said on condition of anonymity. It is proposed that the existing contractors would have to share half the profit of a small field with the state, while medium fields would have to part with 60%, government sources said. The final decision on this matter will be taken by the Cabinet, which will soon consider extending contracts for 28 operational blocks as their mining lease period would expire between 2-7 years, sources said.
Existing contractors of Panna-Mukta, Amaguri, Kharsang, Cambay, Bandut, PY-1, Bakrol, Ravva and Dholka are prominent oil and gas producing fields awaiting extension.
Prominent companies having stakes in such blocks include BG, RIL, Assam Company Ltd, Geo-Enpro, Jubilant Energy, Geopetrol, Oilex Ltd, GSPC, HOEC, Selan Exploration and Joshi Technology, sources said.
According to official estimates, after the expiry of the contracts, these fields will have balance reserves of about 44 million tonnes of oil and oil equivalent of gas. The oil ministry has proposed that there should be a uniform extension policy for such blocks where contractors would require to get their contracts renewed.
"Contracts do provide rights to the government to renegotiate terms before giving an extension," the source quoted earlier said. The government is in favour of giving a chance to the existing contractor because of its familiarity with the field and knowledge of its geology.
"These fields are small and medium size and hence, the extra effort that is required for rebidding is avoidable unless inevitable," the source said.
A contract will be extended only after approval of the existing stakeholders or consortium and application could be moved at least two years prior to expiry of the contract and not before five years of expiry of the contract, sources said. Each application will be vetted by the Directorate General of Hydrocarbons, who would give its recommendations within eight months of submission of the application. The oil ministry will act on DGH's recommendations in four months.