Govt to auction 69 oil, gas fields
The Cabinet today cleared auction of 69 idle oil and gas fields of state-owned ONGC and Oil India to private firms on a new revenue sharing model and unified licence which is expected to monetise Rs 70,000 crore of resources. This decision is expected to stimulate investment as well as higher domestic oil and gas production.
From coal to telecom to radio, the government is moving to an auction driven process for natural resources. While the auction of small and marginal oil fields which were lying idle has been welcomed, there are questions on how much interest will be seen given the glut in global energy markets and falling prices which are forcing energy majors to cut production.
"This is a paradigm shift from the controversial production sharing contract (PSC) and cost recovery model to a more equitable revenue sharing model that protects government interest in both low oil and high oil price scenarios," Oil Minister Dharmendra Pradhan said.
Pradhan said in keeping with the principle of ‘minimum government maximum governance’, significant changes have been made in the design of the proposed contracts.
The earlier contracts were based on the concept of profit sharing. Under the profit sharing methodology, it became necessary for the government to scrutinise cost details of private participants and this led to many delays and disputes. The CAG had also criticised the model which said it encouraged companies to keep raising cost so as to postpone higher share of profits to the government. Under the new regime, the government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil and gas. The second change is that the licence granted to the successful bidder will cover all hydrocarbons found in the field.