India likely to tweak model revenue sharing contracts before next oil, gas auction

KOLKATA (miningweekly.com) – The Indian government is ready to tweak the model revenue sharing contract between it and oil and gas exploration (E&P) companies, before putting up more blocks for auction under the newly unveiled Hydrocarbon Exploration Licensing Policy (HELP) next year.

According to an official in the Petroleum and Natural Gas Ministry, since it would be the first time that the government would be moving from production sharing contracts to revenue sharing contracts, it was willing to make improvements based on feedback from stakeholders.

He said that even if the process of tweaking and improving the model revenue sharing contract took time, it would be worthwhile to “get it right the first time”, saying that the first round of auction under HELP could be pushed back to the next calendar year.

It was pointed out that inputs from various stakeholders and investors were critical considering the fact that it would be the first time that the Indian government would be auctioning composite exploration and production licences covering any hydrocarbon resource that might exist in respective blocks that were put up for auction.

It was underlined that, unlike in the case of a licence for a single hydrocarbon product produced from a block, revenue sharing agreements would be more intricate in case several hydrocarbon products were to be extracted from a single block given the differential pricing regime of each product.

Last month, the Indian government put up 48 small and marginal oil and gas blocks for auction, the first time since 2010. These would be allocated to E&P companies under the new revenue sharing contracts. However, the auctioning of major onshore and offshore oil and gas blocks had been kept in abeyance to allow the government to put in place the next dispensation, the official said.

The government has replaced the New Exploration and Licensing Policy (NELP), under which nine rounds of auctions had been completed, with the tenth round nixed to put HELP in place. Under the latter, E&P companies would have the freedom to explore and extract any fuel they discovered, be it coalbed methane, shale gas, oil or gas, without having to seek fresh approvals for each resource discovered and that too under a composite revenue sharing agreement.

Earlier, under NELP and production sharing contracts, E&P companies that were successful bidders at auction were following government approval allowed to recover costs entailed in developing the block and the government’s share of revenue was determined based on revenue generated from the block adjusted for developmental costs.