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Government to Auction 69 Oil and Gas Fields of ONGC, Oil India

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Published on : Sep 07, 2015

A profit sharing system in India obliged the government and Comptroller and Auditor General to examine the costs incurred by the operator. This was proposed if these overstated the state of revenue share that was likely to suffer. Some of the licenses cover all hydrocarbons obtained in the field, including gas, oil, and shale. 

According to India’s Petroleum Minister, a step towards increasing the country’s hydrocarbon production is equal to reducing the import dependence by 10% by 2022. The minister said this in a briefing with the media after a Cabinet meeting held on Wednesday. 

Out of the 69 fields to be bid out, six were surrendered by Oil India and 63 by ONGC. 

Moreover, through the new revenue sharing system, India will be followed in the upcoming licensing round. 

Leader of oil and gas, PwC India said some of the discovered blocks of the national oil companies are being surrendered to have them developed by various operators who are certain about the cost-efficiency and small-size operations. 

The technology required by any other Indian or foreign company to harness and monetize marginal oil fields haven’t been clear still.   

According to the CCEA decisions, some successful bidders have the liberty to sell crude oil or natural gas at best prices in the market. This is carried out without the need of any government interference.   

The bidders will have two rates – higher and lower revenue point to determine the production and price of the hydrocarbon. In case if the company sells at below this price, the sharing will have to be placed at the market price.  

CAG criticized this model saying it encouraged companies to raise their cost so as to postpone higher share of profits to the government. The government hasn’t kept a fixed revenue share as it will not protect the Center’s interest in case of windfall gain.