Cabinet okays licence extension for 28 small and medium fields

Cabinet on Thursday approved extending licences of 28 small- and medium-sized oil and gas fields, but there was no decision on Cairn India’s prolific Rajasthan oil block. Production sharing contracts (PSCs) for as many as 28 fields, including western offshore Panna/Mukta and Tapti oil and gas fields operated by BG Group of UK, are due for extension. “The Cabinet Committee on Economic Affairs (CCEA) today approved the Hydrocarbon Exploration Licensing Policy, or HELP, extending term of 28 PSCs,” Oil Minister Dharmendra Pradhan said. 

PSCs have been extended till economic life of the asset. He did not specify the terms on which the PSC has been extended. The ministry, based on recommendation of a committee headed by the then additional secretary and financial adviser S C Khuntia, had drawn up a draft extension policy that stipulated an increase in royalty as well as the government’s profit share from the fields, sources said. 

The policy had stipulated that the oil companies pay royalty at prevailing rate as against Rs 481 per tonnes they currently pay. Also, it wanted the government’s share of oil and gas to be increased by 5 percentage points - to 55 per cent in fields like Panna/Mukta where it is currently at 50 per cent and to 60 per cent in fields where it’s at 55 per cent. Royalty rates for blocks offered under the New Exploration Licensing Policy (NELP) since 1999 are 10 per cent of the wellhead value of gas. For oil, it is 12.5 per cent of the price for onland areas and 10 per cent for offshore areas.