Cabinet approves policy incentives for unconventional oil and gas production
14 September 2018
The union cabinet on Wednesday approved the policy framework to promote and incentivise enhanced recovery (ER), improved recovery (IR), unconventional hydrocarbon (UHC) production methods/techniques to improve recovery factor of existing hydrocarbon reserves for augmenting domestic production of oil and gas.
The policy envisages systemic assessment of every field for its ER potential, appraisal of appropriate ER techniques and fiscal incentives to de-risk the cost involved in ER projects, to make the investment financially viable.
The ER includes enhanced oil recovery (EOR), enhanced gas recovery (EGR) and unconventional hydrocarbon (UHC) production methods like shale oil and gas production, tight oil and gas production, production from oil shale, gas hydrates and heavy oil.
Enhanced recovery, improved recovery and exploration and exploitation of unconventional hydrocarbons are capital intensive, technologically complex and challenging in nature. It calls for supporting infrastructure, logistic support, fiscal incentives and enabling environment, the cabinet headed by Prime MINISTER Narendra Modi noted.
The strategic objective of the policy is to build a supportive ecosystem through academic and research institutes, industry-academia collaboration and to support and encourage exploration and production (E&P) contractors to deploy ER/IR/UHC methods/ techniques. The policy, which will be applicable to all contractual regimes and nomination fields, is expected to spur new investment, provide impetus to economic activities and generate additional employment opportunities.
The Policy is expected to facilitate induction of new, innovative and cutting-edge technology and forging technological collaboration to improve productivity of existing fields.
The policy envisages systemic assessment of every field for its ER potential, appraisal of appropriate ER techniques and fiscal incentives to de-risk the cost involved in ER projects to make the investment financially viable.
The policy envisages mandatory screening of fields through designated institutions, to be notified by the government, and conducting pilot studies before actual implementation of ER project on commercial level.
An enhanced recovery committee comprising representatives of the ministry of petroleum and natural gas, Directorate General of Hydrocarbons (DGH), experts from upstream sector and academia would monitor and implement the policy.
The policy, having a sunset clause, will be effective for 10 years from the date of its notification. However, the fiscal incentives will be available for a period of 120 months from the date of commencement of production in ER/UHC projects. In case of IR projects, the incentives will be available from the date of achievement of the prescribed benchmark. Defined timelines have been prescribed to complete the various processes under the policy.
The fiscal incentives are extended in the form of partial waiver of applicable cess/royalty on incremental production resulting from the adoption of ER methods on designated wells.
Technological interventions have significant potential in stimulating the recovery of hydrocarbon reserves from the matured/aging fields. An increase by 5 per cent in recovery rate of original in-place volume in oil production is envisaged producing 120 MMT additional oil in next 20 years. In case of gas, an increase of 3 per cent recovery rate on original in-place volume is envisaged, leading to additional production of 52 BCM of gas in next 20 years.