'More reforms in offing to raise private participation in oil and gas fields'

New Delhi: Oil Secretary Tarun Kapoor on Wednesday hinted at more reforms to raise the level of private participation in upstream oil and gas exploration and production, but remained non-committal on the industry's demand for cutting levies to make the business attractive during a low price regime. Talking to reporters at the end of the India Energy Forum of CERAWeek, he said companies will have to learn to live with low prices.

"There was a demand from various upstream companies for a reduction in cess and royalty. That was a demand that was there. To accept or not to accept is up to the government which takes a decision considering overall resource requirement (of the economy)," he said.

With oil prices slumping after the pandemic pummelled fuel demand, upstream producers such as ONGC asked the government to cut oil cess and royalty. While low oil prices are good for consumers, they do not support new investments that are needed to keep oil and gas flowing from wells.

ONGC wanted the government to abolish oil development cess if the price realised by producers is less than $45 per barrel. It also wanted royalty that the central government charges on oil and gas produced from the offshore areas to be waived.

Currently, the government levies a 20 per cent ad-valorem oil industry development cess on the price that producers get. Also, ONGC/OIL are required to pay a 20 per cent royalty on the price of crude oil they extract from onland oil blocks to the state governments. The central government charges 10-12.5 per cent royalty on oil produced from offshore areas.

Kapoor said the upstream industry was not in so much stress now, with the oil prices recovering from the lows of $20 per barrel to around $40. "Upstream companies have to now work at these prices.

In the long term, upstream companies will have to adjust to the market." On the issue of near absent private sector participation in the last two bid rounds for oil and gas blocks, he said there is "a lot of appetite" for investing in upstream oil and gas exploration and production in India but the pandemic played spoilsport.