Oil ministry justifies gas price hike, may tweak production sharing contracts

The NDA government is working on a proposal to remove bottlenecks in the way of existing production-sharing contracts in order to make the country's hydrocarbon sector more investor-friendly.

The ministry of petroleum and natural will also look at sharing of revenue for future oil and gas contracts and seek certain changes in the pacts for faster resolution of legal disputes.

While the exact nature of changes are still under discussion, officials say petroleum minister Dharmendra Pradhan's primary emphasis is on removing the hurdles to starting of commercial production from existing blocks.

At present, of the 165 discoveries under the New Exploration Licensing Policy (NELP) regime, only Reliance Industries' KG-D6 field and a small Niko Resources field are under production.

Even in the KG-D6 field, production has been declining continuously over the past few years amidst several legal disputes, including one on production shortfall of 154 million standard cubic metres a day (mscmd). This also figures prominently in the presentation the ministry's officials have prepared for Prime Minister Narendra Modi.

"Production-sharing contracts, beset by legal disputes, should have been revised on the basis of experiences from working of the existing blocks," the presentation said.

"Our focus is on a complete clean-up of hurdles in the functioning of the existing production-sharing contracts, to make those more industry-friendly," said officials close to the development.

The ministry also wants to make oil sector investments attractive to foreign investors. "The move may give more powers to the directorate general of hydrocarbons for extension of work flows. For example, we will check whether the time period for extension of submission of declaration of commerciality, besides field development plans, can now be extended by the hydrocarbon regulator."

Foreign companies like BHP Billiton, Santos, BP and Eni find the going difficult in India with their exploration activities wanting defence clearances. These companies are unable to meet their work commitments due to lack of clearance from the defence ministry.

Industry officials, meanwhile, said the slow decision-making process was also a major hurdles for them. The delay is because of multiple approval layers, as review provisions are treated as approval functions, they point out.

Companies also complain against the thorough scrutiny by the management committee which, they say, has assumed "primarily policing and protecting the notional profit share" roles.