India announces major policy initiative to boost hydrocarbon sector

In a significant development, the Indian government announced a big-bang policy initiative to help explorers to unlock hydrocarbon reserve worth $36.6 billion (Rs 2.33 lakh crore). This is more than 50 percent of the crude import bill estimated for 2015-16. The latest reforms, unveiled by the government in the oil & gas sector on March 10, will help retain and expand jobs amid low oil and gas prices as well as make it easier for them to do business. The market-friendly decisions, taken by the Cabinet Committee on Economic Affairs, are expected to kick-start investment in the country’s exploration and production sector by easing intricate government. The latest reforms will cut red tape and remove government discretion, and seeks to create a fair marketplace with a transparent policy regime. Describing the new policies as global models, India’s Oil Minister Dharmendra Pradhan said: “I believe the world will follow us and investors will be back.” The industry will benefit from the marketing and pricing freedom for gas from deep-water, ultra-deepwater and high pressure, high temperature blocks. The pricing formula for these fields is attractive despite a cap linked to alternative fuels – fuel oil, naphtha, imported coal and liquid gas. The formula will offer a price of $7 per unit, nearly double that of the going rate for gas from other fields. The cap will be revised every six months. The new contracts will follow the revenue-share model instead of profit share model that has been criticised by the federal auditor.