Oil ministry extends deadline for comments on draft revenue sharing model till 20 September

The petroleum ministry has given time till 20 September for stakeholders to comment on the model revenue sharing contract it wants to replace the present Production Sharing Contracts (PSC) with.

The ministry had, on 21 August, floated a simpler revenue-sharing contract for exploration and production of oil and gas and sought comments from stakeholders by 10 September.

This deadline has now been extended to 20 September. ''...timeline for receiving comments on draft Model Revenue Sharing Contract (MRSC) has been extended up to 20 September 2014,'' a ministry release said.

A committee headed by C Rangarajan, appointed by the previous government, had suggested moving to a revenue sharing regime where companies bid upfront the quantity of oil and gas they will share with the government for winning an exploration acreage. The ministry had accepted this in-principle, and floated a MRSC.

The MRSC will replace the current practice of companies getting blocks by bidding maximum work programme and then recovering all of their investment before sharing profits with the government.

The Comptroller and Auditor General had criticised this, stating that it encouraged companies to keep raising cost so as to postpone higher share of profits to the government. In the new regime, the companies will have to indicate the quantity of oil and gas they will share with the government at different stages of production as well as at different rates.

''The government's revenue share of crude oil and/or natural gas shall be determined based on a two dimensional production-price matrix, where government's revenue share with the contractor(s) shall be linked to the average daily production in a month and average oil and gas prices in a month,'' the draft MRSC said.

Besides quoting the quantity they will share with the government at different levels of production, the companies would also quote the quantum at different price levels-less than $100 per barrel, $100-125, $125-150 and more than $150 per barrel for oil and for gas in bands of less than $6 per million British thermal unit rate, $6-10, $10-14 and more than $14 per mmBtu. The production levels for onland, shallow offshore and deepwater have been proposed at different tranches.

Companies will have to bid the amount they will share with the government at different levels of production as well as different rates for oil and gas. ''In the matrix production is linked to sliding scale (incremental) production tranche and price is linked to fixed scale price band,'' the draft MRSC said.